We're Down (But Not Unhappy)

April and June were disasters with the S&P 500 index down -6.1% and -7.1%, respectively.  The US dollar retreated agianst major currencies and foreign investors fled our market.  Corporate scandals bankrupted companies and shattered investor confidence.  The S&P 500 index's basic materials and the consumer staples sectors were the best performers: down only -2.1% and -3.0%.  Tech and teleco were each down over -20% for the quarter.  All returns are after dividends.

Gold Leaf is a lower risk investment firm that buys stocks when they are out of favor at lower multiples. On June 30th, portfolio attributes were:

Our basket of small bank stocks performed exceedingly well.  For the quarter, Wintrust of Chicago was up over 50%; Lakeland Financial and MidWest Banc Holdings were each up over 30%.  Andersons, a Toledo based agriculture and fertilizer producer returned 34% and still has potential as it eliminates its excess fertilizer capacity.  Our largest holding is cash, now at 9.7% of the portfolio, followed by Lakeland Financial, MidWest Banc, and Pfizer.  All returns are after dividends.

We continue to search for higher yielding opportunities and have purchased several higher yielding convertible preferred issues.  These hybrid securities offer substantial yields: over 7.0%, and in one case, over 8.0%.  We only buy convertibles of companies with solid or improving fundamentals.  As the common stock appreciates, the convertible will begin to track that appreciation.  If the common stock does little, despite improving fundamentals, we still collect our high yield and benefit from the downside protection that yield affords.  Gold Leaf continues to search for undervalued companies with sustainable competitive advantages and free cash flows that generate long term value for our clients.