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NO EXCUSES, JUST THE FACTS
3/21/2006 |
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For those of you who have not been following the progress of your portfolio and for those of you who are wondering why we have lagged the benchmark Russell 1000 Growth index thus far in 2006 by about 2.9%. The answer lies in the portfolio beta. Year to date two things have happened, one good and one bad. The good has been that when the market corrects our portfolio holdings have not gone down as much as the market. The bad, when the market advances we do go not up as much as the market. Since there have been more up days than down we have underperformed. Not to make light of the situation however, it is not the first time this has happen to us, and I doubt it will not be the last. The market has had a good run as of late, there is no denying that, but we have not been convinced that it’s sustainable. When you consider that there are only two sectors of the market recognized as overweight, Telecommunications and Transportation, which are not the sectors bull markets are made of. For the record we are significantly over weighted in telecommunications and hold an overweight in a single holding in the transportation sector (there are very few choices in the transportation large cap space). The only sectors showing any signs of coming to life are the Basic Materials and Capital Goods sectors. The rest have actually gotten worse. Current readings are not an indication what the next year to eighteen months may hold. However, we hope things improve sooner rather than later. Another benchmark observation is that although the Russell 1000 Growth benchmark is a fair representation of the style, the average cap weight is $5 billion, consequently a good number of the little guys, which has had a good run thus far (up 10% YTD) contribute to a good portion of the return to benchmark performance.
Of course least we not forget, if we are to error, we shall error to the conservative and protect principal.
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