Last year was not a strong one for the Gehman Capital Solutions Undervalued Growth Companies portfolio. The performance was good until the end of March, but after that the small/micro stocks came under pressure. In 2012, the Russell 2000 index was up 14.6% and the Gehman Portfolio was down 1.0%. The latest year-to-date performance of the portfolio and the relative indexes can be found here.
Each company in the Gehman portfolio has a different story. Small companies grow in fits and starts. I am satisfied with the performance of each one of my companies, but almost all my stocks are trading closer to the low end of the trading range for 2012. Go here to see the portfolio’s major holdings.
I wrote in my Covestor investment letter back in January 2012, that Europe would agree on policies that solve their individual liquidity problems and would eventually allow their economies to grow. That has happened. The US has avoided falling off “fiscal cliff.” We still have problems to solve, but the markets in 2013 are starting with a positive outlook.
In my Covestor January 2012 report, I stated that “confidence in the markets is starting to be restored. I expect that to continue in a big way in 2012.” As for this year, in my opinion, equity prices will be significantly higher by the end of the 2013 year.
I believe that the “easy money” policies of central banks will continue to strengthen the world economies and the world stock markets. On Jan 7, the Basel bank liquidity rules were eased, and Bank of America (BAC) resolved $10 billion in disputes with Fannie Mae. In my opinion, developments such as these may allow banks to loosen their lending requirements.
As the economy recovers, I believe interest rates should move up and investors will see losses on their bonds and will buy stocks. As confidence continues to be restored in the economy and the stock market, I expect investor interest to move back to small cap stocks that have more risk, but can offer greater return.
Performance discussed is net of advisory fees, and includes reinvestment of dividends or other earnings. Past performance is no guarantee of future results.
The investments discussed are held in client accounts as of January 7. These investments may or may not be currently held in client accounts. The reader should not assume that any investments identified were or will be profitable or that any investment recommendations or investment decisions we make in the future will be profitable.
Any index comparisons provided in the blogs are for informational purposes only and should not be used as the basis for making an investment decision. There are significant differences between client accounts and the indices referenced including, but not limited to, risk profile, liquidity, volatility and asset composition. The S&P 500 is an index of 500 stocks chosen for market size, liquidity and industry, among other factors. The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000® Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership.
Certain information contained in this presentation is based upon forward-looking statements, information and opinions, including descriptions of anticipated market changes and expectations of future activity. The manager believes that such statements, information and opinions are based upon reasonable estimates and assumptions. However, forward-looking statements, information and opinions are inherently uncertain and actual events or results may differ materially from those reflected in the forward-looking statements. Therefore, undue reliance should not be placed on such forward-looking statements, information and opinions.
