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What is New:
While we have increased our exposure to the Consumer Discretionary sector, a number of the sub-sectors we owned previously are no longer represented within the portfolio. Our largest increase within the Consumer Discretionary segment came in the Auto Parts & Equipment sub-sector, where we added four new positions and one additional stock within the Automotive Retail space. A confluence of factors, including banks tighter lending policies combined with consumer uncertainty may continue to aid auto part suppliers that supply parts to the used car marketplace. The stocks we have added to the Auto Parts & Equipment sub-sector are: Autoliv (ALV), BogWarner (BWA), Tenneco (TEN) and TRW Automotive (TRW), with Advance Auto Parts (AAP) added in the Automotive Retail segment.
Along these same lines, we have added two retailers, both with catalog exposure but different sales methods. HSN, Inc. (HSNI) HSN, Inc. through its subsidiaries, owns, operates, and retails computers and electronics, fashion items, home and kitchen goods, jewelry, and health, beauty, and fitness products through its shows, which are broadcast via cable, satellite, and network television. Williams-Sonoma, Inc. (WSM) retails cooking and serving equipment as well as home furnishings through the Williams-Sonoma, Pottery Barn, Pottery Barn Kids, and Chambers brands.
In addition to these broader retail names, we have added three specialty store names and one footwear retailer. The footwear company now in the portfolio is Crocs, Inc. (CROX) the shoe producer. The specialty stores added in the quarter include: Tractor Supply (TSCO) the domestic operator of a retail farm store chain, Jo-Ann Stores (JAS). a national chain of fabric and craft retail stores and Ulta Salon, Cosmetics & Fragrance, Inc. sells cosmetics, fragrances, skin and hair care products, appliances, and accessories.
The two remaining stocks with the Consumer Discretionary sector are: Wyndham Worldwide (WYN) a hospitality company that franchises hotels and provides management services in the upscale, midscale, and economy segments of the lodging industry and Valassis Communications (VCI) a media and marketing services company targeting audiences by mail, print, stores, as well as online.
Consumer Staples: Decrease
We continue to be underweight the S&P 500 in this sector and have sold out of the three positions we held in the segment. We currently have no exposure to companies in the Consumer Staples space.
Energy: Decrease
Versus the S&P 500 we continue to be underweight Energy. During the quarter we paired our weighting by approximately 7%, selling the three companies we previously owned and adding one stock in the Oil & Gas Equipment & Services sub-sector. Complete Production Services (CPX) establishes, maintains, and enhances the flow of oil and gas throughout the life of a well, offers land drilling, specialized rig logistics and site preparation services.
Financials: Maintain
During the quarter we sold out position in AmeriCredit effectively replacing it weighting with that of Jones Lang LaSalle (JLL). JLL provides real estate and investment management services to multinationals, corporations, institutions, occupiers, and investors around the world. Among it services offered are tenant representation, property management, agency leasing, finance, and valuations.
Healthcare: Maintain
We have maintained the same weighting that we held previously in the portfolio for Health Care. However. we have shifted the sub-sectors within the group. We previously owned two companies in the Pharmaceutical sub-sector and one in Health Care services. Currently all three equities we own in the Healthcare sector are in the Managed Care sub-sector. AMERIGROUP (AGP), is a multi-state managed healthcare provider, the company serves people who receive healthcare benefits through state-sponsored programs including Medicaid, Children's Health Insurance Program, and Family Care. Magellan Health Services (MGLN) coordinates and manages the delivery of behavioral healthcare treatment services through contracted third-party treatment providers, including psychiatrists, psychologists, psychiatric hospitals, and residential treatment centers. Healthspring (HS) is a health maintenance organization serving Medicare recipients with a network of hospitals and physicians.
Industrials: Increase
The Industrial sector is overweight relative to the S&P 500 index. During the quarter we purchased five new companies, removing the three we previously held. Of those two were Airlines stocks; two are in the Construction & Farm Machinery sub-sector and one Applied Industrial Technologies (AIT) is a Trading Company and Distributor. AIT distributes bearings, seals, power transmission, hydraulic and pneumatic components, and general maintenance items. The company also provides engineering design and systems integration services.
The two Airline stocks now held in the portfolio are United Continental Holdings (UAL) and US Airways (LCC). US Airways Group, Inc. is an air carrier servicing the passengers, property and mail in the United States, Canada, Europe, the Caribbean, and Latin America, much the same as United Continental Holdings.
The two Construction & Farm Machinery companies added during the quarter are ArvinMeritor (ARM) and Toro (TTC). The Toro Company designs, manufactures, and markets a range of turf equipment sold worldwide under trademarks such as Toro, Wheel Horse, Lawn-Boy, Irritrol, and Dingo. ArvinMeritor serves the light vehicle, commercial truck, trailer, and specialty original equipment manufacturers providing integrated drive train, braking systems, modules, and components.
Information Technology: Decrease
We continue to be underweight the sector versus the S&P 500, holding just one company in the Computer Storage and Peripherals sub-sector. Lexmark International (LXK) develops, manufactures, and supplies printing and imaging solutions for offices and homes worldwide. The company’s products include laser printers, inkjet printers, multifunction devices, and associated supplies, services and solutions.
Materials: Maintain
While we maintain our weighting in the Materials sector, our second largest overweight versus the S&P 500 index, we have added four new names to replace the previous four that were held in the prior quarter. All four of the companies added during the quarter are in the Specialty Chemical sub-sector. Ferro Corporation (FOE) produces a variety of coatings, colors, ceramics, chemicals, plastics, and related products. The company's primary markets are building and renovation, major appliances, household furnishings, transportation, industrial products, packaging, and leisure products. The Lubrizol Corporation (LZ) develops, sells, and produces specialty additive packages used in transportation and industrial finished lubricants. PolyOne Corporation (POL) is an international polymer services company providing thermoplastic compounds, specialty resins, specialty polymer formulations, engineered films, and color and additive systems. Rockwood Holdings (ROC) is an international developer, manufacturer and marketer of inorganic chemicals and solutions and engineered materials.
If you have any questions, please don’t hesitate to give
us a call at (800) 966-4354.
Brian Peery
Director of Research |
