Insightful Investing Newsletter April 2011
1st Quarter 2011 Financial Market Review
The geopolitical news was almost all negative in the first quarter of 2011, but that did not stop stocks from advancing. Take your pick, unrest in the Middle East, continuing sovereign debt issues in Europe, or the earthquake and tsunami in Japan, each had a negative impact on stocks during the first half of March. In spite of this, more signs of an economic recovery, including good earnings and a drop in the unemployment rate, helped stocks rebound in the second half of the month as the broad stock market gained 6.4% this quarter.
Once again, Mid Cap Stocks led the charge, rising 9.4% in the first quarter, Small Cap stocks picked up 7.9%, and Large Cap Stocks added 5.9%. While size did matter this quarter, style had virtually no impact as Value Stocks were up 6.5% and Growth Stocks gained 6.3%.
Thanks to all of the previously mentioned events around the world, investing in the good ole USA proved to be a better idea than searching for profits outside of our borders. Stocks around the rest of the world have gained only 3.4% so far this year.
The troubles in the Middle East pushed Oil prices above $100 a barrel helping Energy to lead commodities to a gain of over 10% in the first quarter of 2011. Interestingly, Gold was the weak sister, finishing just above break even, while Silver has gained a stellar 22% so far this year, pushing its astronomical rise in the past 12 months to almost 115%.
You might have expected all of the turmoil around the world to lead to a flight to quality that would push US Treasuries higher, and you would have been right for a couple of weeks, but in the end US Bonds ended the quarter close to where they started. More significantly, continued signs of higher inflation helped Inflation Protected Bonds or TIPS, pick up 2% this quarter as rising prices continue flame expectations of higher inflation in the future.
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1st Quarter 2011 Mutual Fund Performance and ETF News
Early in the quarter, volatility was at its lowest level in almost a year, but before the quarter was over it reached its highest level in the past year. In the end, it was a good quarter for the stock market. Three of our funds were ahead of the pack. Wells Fargo Advantage Growth (SGROX) gained 12.9%, FBR Small Cap (FBRYX) added 10.7% and Artisan Mid Cap Value (ARTQX) earned 10.3%.
Our top International funds were Harding Loevner International Small Company (HLMSX) which was up 5.0% and Manning and Napier World Opportunities (EXWAX) which returned 4.9%. Our top alternative funds were Wasatch Long/Short (FMLSX) which gained 7.4% and Cohen and Steers Realty Shares (CSRSX) earned 6.8%.
A strong stock market was good for High Yield bonds which were led by Metropolitan West High Yield Bond (MWHYX), up 4.4%, and Artio Global High Income (BJBHX) an earner of 4.1%. Two other good performing Bond Funds were Fidelity Inflation-Protected Bond (FINPX) which gained 1.9% and RS Floating Rate Y (RSFYX) a 1.7% performer.
A stong stock market was good for High Yield bonds which were led by Metropolitan West High Yield Bond (MWHYX), up 4.4%, and Artio Global High Income (BJBHX) an earner of 4.1%. Two other good performing Bond Funds were Fidelity Inflation-Protected Bond (FINPX) which gained 1.9% and RS Floating Rate Y (RSFYX) a 1.7% performer.
The geopolitical turmoil made things difficult for our Emerging Equities funds this quarter as Wasatch Emerging Markets Small Cap (WAEMX) lost 3.50%. Surprisingly, a couple of our Long/Short funds were not far behind as both AQR Managed Futures Strategy (AQMNX) and Hussman Strategic Growth (HSGFX) lost 2.7%
The big winners in the ETF space this quarter were commodity funds. The iShares Silver Trust (SLV) gained a stellar 21.8% for the quarter, pushing its rise for the last 12 months to an astronomical 114.5%. PowerShares DB Energy (DBE) was next in line with a gain of 17.0% with Energy Select Sector SPDR (XLE) not far behind moving up 16.9%.
As far as stocks were concerned, iShares S&P MidCap 400 Growth Index (IJK) topped our list with a gain of 9.7%, followed closely by iShares Russell 2000 Growth Index (IWO) with a return of 9.2%. You could not generalize the results of international stocks as a couple of 2010's laggards bounced back well as iShares MSCI Spain Index (EWP) earned 15.4% and iShares MSCI Italy Index (EWI) added 13.5%. On the other hand, iShares MSCI Chile Index (ECH) lost 9.8%, while both SPDR S&P Emerging Markets Small Cap (EWX) and iShares MSCI Japan Index (EWJ) dropped 5.5%.
Not a lot happened in the bond categories this quarter, but a falling US dollar helped SPDR DB International Government Inflation Protected Bond (WIP) and SPDR Barclays Capital International Corp Bond (IBND) both picked up 4.1%. On the opposite side of that table was PowerShares DB US Dollar Index Bullish (UUP) which was down that same 4.1%.
Portfolio Changes and Asset Allocation for 2nd Quarter 2011
While there are no specific changes to our Asset Allocations this quarter, it is time to rebalance your portfolio to your targets for each asset class.
This resulted in the addition of several new funds to our list of Top No Load Mutual Funds during the quarter, including RS Floating Rate Y (RSFYX), Northern Emerging Markets Equity Index (NOEMX) and Driehaus Emerging Markets Growth (DREGX). We removed Quaker Akros Absolute Strategies (AARFX) because it is no longer available as a no-load fund.
We have made a few changes to our Best ETFs List of Exchange Traded Funds for this quarter. As we add a few new entrants to the ETF marketplace, it is important to see if they build up enough volume to warrant inclusion in our list. We removed iShares MSCI Italy Index (EWI), iShares MSCI Spain Index (EWP), and PowerShares S&P 500 BuyWrite (PBP). The new additions this quarter are iShares MSCI Switzerland Index (EWL), IQ Global Resources ETF (GRES), and Wisdom Tree Managed Futures (WDTI).
Mutual Fund Portfolios April 2011
ETF Investment Portfolios April 2011
