OIL SHOCK

Both bond and stock prices fell in the 1Q as oil approached $55 a barrel.  The 10 year Treasury's yield backed up to 4.48% from 4.22% three months earlier.  Consequently, a wide range of bonds and interest rate sensitive securities declined.  Most equities suffered.  High PE stocks contracted; the S&P 500 index's tech sector lost -7.4% and telecom was down -7.7%.  Financial stocks lost -6.4%.  The glaring exception was the energy sector, up +17.5% for the Q.  Gold Leaf portfolios have a higher yield than the overall market.  Hence, they are more interest rate sensitive.  All returns are after dividends.

Gold Leaf is an Independent Registered Investment Advisor that buys stocks in cash positive companies with sustainable competitive advantages.  Gold Leaf's goal is to provide objective investment management and to protect client assets on the downside while participating in most of the market's upside.  On March 31st, portfolio attributes were:

Our highest gainer was Watsco, an HVAC company that dominates the South and is retooling housing damaged by last year's hurricanes.  Pharma Product Development Inc. was our second biggest winner for the Q with a +17.3% return (on top of last year's 53% return).  The company contracts to perform first and second phase drug trials.  Hospitality Properties, one of our conservative hotel REITs, was down -12.2% for the Q as investors pursued higher yield bargains.  All returns are after dividends.

We initiated three new partial positions in the Q.  The first is a manufacturer of thin film deposit equipment serving the flat panel display and architectural markets.  The company is debt free and has recently purchased a Taiwanese firm to gain access to Asian markets.  We purchased shares of a company that produces a DNAwithPAP test that detects human papillomavirus, a primary cause of cervical cancer.  Our third postition is a biopharmaceutical company that produces drugs to fight global diseases including HIV and the flu.

Gold Leaf does not provide legal, accounting, or tax advice.