Cambridge Q3 comment 4

Dnavas

Description

Third Quarter 2010 Review Alan Radio, Chief Investment Officer Cambridge Advisors Major stock markets surged during the third quarter as investors regained confidence in the worldwide economy. Most markets, including Canada, achieved double-digit gains, despite a pullback in August. Europe, Asia (excluding Japan) and emerging markets had a particularly strong September, as fears of a “double-dip” recession all but disappeared. Despite the renewed market strength, there remained a dislocation in the market between equity fundamentals and stock prices, driven by investors seeking higher yields than those offered by bonds. Nonetheless, our strategy remained focused on a continuing economic recovery, with an emphasis on companies that have been leaders in their areas and have demonstrated solid earnings through much of the recessionary period. These companies have made gains based on earnings leverage rather than leveraging their balance sheets. Canadian equities continued to benefit from the country’s strong economy relative to that of many other countries, and from the perceived strength of its banking system. This confidence was somewhat undermined by uncertainty about the health of the U.S. economy, to which Canada’s fortunes to an extent are tied due to the significant trade between the two countries. In keeping with expectations of economic growth, Cambridge Canadian Equity Corporate Class held significant positions in energy, industrials ...

Informations

• Publié par: Ofte
• Nombre de lectures: 9
• Langue: English

Extrait

2 Queen Street East, Twentieth Floor, Toronto, Ontario M5C 3G7

I

www.ci.com

Third Quarter 2010 Review

Head Office / Toronto

416-364-1145

1-800-268-9374

Calgary

403-205-4396

1-800-776-9027

Montreal

514-875-0090

1-800-268-1602

Vancouver

604-681-3346

1-800-665-6994

Client Services

English: 1-800-563-5181

French: 1-800-668-3528

Alan Radio, Chief Investment Officer

Cambridge Advisors

Major stock markets surged during the third quarter as investors regained confidence in the

worldwide economy. Most markets, including Canada, achieved double-digit gains, despite a

pullback in August. Europe, Asia (excluding Japan) and emerging markets had a particularly

strong September, as fears of a “double-dip” recession all but disappeared.

Despite the renewed market strength, there remained a dislocation in the market between equity

fundamentals and stock prices, driven by investors seeking higher yields than those offered by

bonds. Nonetheless, our strategy remained focused on a continuing economic recovery, with an

emphasis on companies that have been leaders in their areas and have demonstrated solid earnings

through much of the recessionary period. These companies have made gains based on earnings

leverage rather than leveraging their balance sheets.

Canadian equities continued to benefit from the country’s strong economy relative to that of many

other countries, and from the perceived strength of its banking system. This confidence was

somewhat undermined by uncertainty about the health of the U.S. economy, to which Canada’s

fortunes to an extent are tied due to the significant trade between the two countries. In keeping

with expectations of economic growth, Cambridge Canadian Equity Corporate Class held

significant positions in energy, industrials and information technology. While these sectors

underperformed some others, notably materials, during the period, we believe this positioning

bodes well for the fund for the coming quarters. The materials sector was boosted by the

disclosure of a bid by international mining giant BHP Billiton for Potash Corp., one of Canada’s

largest companies by market capitalization.

We reduced our Canadian bank holdings, adding U.S. financials such as JP Morgan Chase and

State Street to the portfolio. The fund was more than 30% invested outside Canada, up about five

percentage points from the end of the previous quarter. The biggest individual positive

contributors to performance were National Bank of Canada, Magna International and Keyera

Facilities, while Goldcorp and ISE were the biggest detractors.

Cambridge Canadian Asset Allocation Corporate Class adhered to a similar equity strategy,

although it had a higher weighting in energy stocks than the equity fund. Energy stocks

represented more than one-quarter of its equity assets, substantially higher than three months

earlier. We added key holdings in related areas, notably Interprovincial Pipeline and Pembina

Pipeline. Energy trusts are among the fund’s income-producing holdings, which we favour over

Third Quarter 2010 Review

fixed-income investments in today’s continuing low-interest rate environment. The fund slightly

underperformed its benchmark (which comprises 60% Canadian stocks and 40% bonds).

Contributing to performance were Keyera Facilities, National Bank of Canada and Magna

International, while Manulife Financial and Goldcorp were the biggest detractors.

Overweight positions in energy and industrials helped Cambridge Global Equity Corporate Class

slightly outperform its benchmark. Financials also remained an important component, with stocks

in this sector dominating the top holdings, along with energy issues. Among our key additions

were Noble Energy and Wells Fargo. We increased our emphasis on U.S. companies with solid

earnings and cash flow, and growth opportunities. The biggest individual positive contributors to

performance were Autoliv, OGX Petroleum (which was sold at a profit during the period), and

Abcam, while ITT Educational and Comtech were the biggest detractors.

We are optimistic that economies in many regions will continue to grow this year and into 2011.

In general, cash levels on corporate balance sheets are at a very high level, which demonstrates

there is good value in the market, and the potential for mergers and acquisitions.

Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund

investments. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change

frequently and past performance may not be repeated. This commentary is provided as a general source of

information and should not be considered personal investment advice or an offer or solicitation to buy or sell

securities.