DANCING ON A HIGH WIRE

The market danced on a high wire.  On one hand, the economy clearly rebounded from the 4Q's hurricane slowdown.  Corporate profits were up.  Basic materials of the S&P 500 index gained +7.2% while the industrial sector was up +7.0%.  All of it signaled continued strength -- perhaps too much.  Inflation made the wire tremble.  Oil remained above $60 a barrel.  Commodity prices continued their ascent.  The utility sector lost -1.1%, and the 10 year Treasury's yield rose to 4.85% from 4.39% three months earlier.  Yet in the end, profitability won out over inflationary fears, and our high wire market made it safely across.  The S&P 500 index returned +4.2% for the Q.  All returns are with dividends reinvested. 

Gold Leaf is an independent Registered Investment Advisor that buys stock 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 best stock in the Q was Digene, up +34%.  The company develops and manufactures DNA testing systems that screen, monitor, and diagnose human diseases.  Their DNAwithPAP test detects human papillomavirus, the primary cause of cervical cancer.  Tractor Supply, the rural man's Wal-Mart, also performed admirably returning just above +25%.  We gave back some gains from last year's high flyer; Somanetics, maker of oximeters, came back to a more reasonable valuation after being up over +100% in 2005.  All returns are after dividends.

With the market making quick gains in the Q, we added very little to our equity positions.  Our only new position was in a company that designs and manufactures wire and cable products to the energy, industrial, and communications markets.  The nation's electric grid will demand continued upgrades as new plants and lower cost energy sources need to be interconnected.

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