FED PAUSES & WHAM!!

The market's catalytic event was the Fed's June 29th decision to pause their interest rate hikes.  The change was palpable: subdued 1st half gains gave way to double digit gains in the 2nd half.  Telecommunications was up +8.7% for the 4Q and +32.9% for the year as buyout firms became enamored with cellular franchises.  The energy sector was up +11.3% in the 4Q and +23.3% for the year despite crude prices peaking in July.  Even the sluggards did well.  Tech was up +6.1% for the Q and +7.9% for the year.  Healthcare, fearing Democratic strength, was up only +1.6% for the 4Q and +7.7% for the year.  Every sector participated.  And now the questions is, "Has the Fed overshot, thereby laying the groundwork for a recession?"  (All returns are with dividends reinvested.)

Gold Leaf's goal is to protect client assets on the downside while participating in most of the market's upside.  In years when the market rallies strongly, we will not match that return.  This year was no exception. 

Gold Leaf is an independent Registered Investment Advisor that buys stocks in cash positive companies with sustainable competitive advantages.  On December 31st, portfolio attributes were:

Our largest gainer for the year was Digene, the maker of gene-based diagnostic kits, which was up +64.3%, after dividends.  International Game Technology, manufacturer of sophisticated gaming machines, was up over +50% with dividends.  Harley-Davidson and Lab Corp. were each up over +35% after dividends.  Our weaker stocks tended to be those with exposure to the housing market: Simpson Manufacturing and Watsco, which were negative performers.

In 2006, our watershed sale was Pfizer.  The company itself was stunned to learn that its lead drug candidate, torcetrapib, caused unexpected deaths.  The drug was to be the savior preventing a patent (and earnings) falloff in 2011 when $12 billion seller Lipitor will face generic competition.  In the 4Q, we've purchased some international REITs and a small slice of the Indian market via an index product.

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