2010 Q1 Fund Performance Updates

i saw an interesting cartoon in the wallstreet journal a few weeks back. It depicted 2 guys talking abt the stock market. The caption in the cartoon read "I was bearish, then bullish... and now i am sheepish". Strangely, that was exactly how i felt in the first quarter for 2010. I became very cautious in spending our cash when looking into new investments as the stock markets started to creep upwards, pushing valuations higher. It is good news as we are 85% vested for the quarter, but at the same time, it means that my job will be more challenging in the coming quarters than it was before.

*VTV: Vanguard Value ETF

Our fund did well compared the the S&P and Vanguard Value ETF benchmarks. In 2009, we had a stunning 87% recovery as our heavy bets on the cyclical sectors for consumer discretionary products and building material/home builders finally paid off. Due to our investment strategy of looking at deep value companies with a mid/long term recovery, our fund's short term returns will continue to remain volatile when compared to our benchmarks.

Key Activities for the Quarter:
- I started to wind down our positions in large caps. These were picked up in Mar 09 as the market was ridiculously bearish. I sold off our position in P&G and am currently reviewing our holdings in GE, Merck, Coca Cola. The key consideration is the profit taking of these positions in view of better investments that come along. However, these large caps have provided good stability in our portfolio over the last year, paying out very decent dividends too.

- As part of our 2010 strategy (refer to earlier post) of expanding into value counters exposed to the growth in emerging markets, I picked up positions in Raffles Education and am looking at accumulating in Banyan Tree. Raffles Education cost us an average of S$0.42 per share. The counter is very volatile as the company undergoes short term challenges in the management of OUC (recently, they have announced that Kazanah had taken an equity stake in OUC which the company intends to list eventually). I will continue to monitor this counter and look for further opportunities to accumulate more shares.

As for Banyan Tree, as the company grows in Asia, it hopes to diversify its revenue base which is currently about 60% from its operations in Thailand. I felt that the current political turmoil in Bangkok provides a good buy-in opportunity for the company whose share price is trading at abt S$0.75 a share. As the asian economies recovery, the company will benefit from the greater spending power of the consumers in the regent who will look for more luxurious alternatives to spend their holidays. This is seen in their latest annual earning release.

- Bet on US recovery: Also in the pipeline are Fasternal and Sherwin Williams which i am analysing. These are solid companies that positioned themselves well in the last 2 year and will benefit when the housing sector and US economy recovers in the next few years.

- Cash is King: Currently we hold 14% of our portfolio in cash. This will increase as i continue to move out from our large cap holdings.