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AlphaProfit Newsletter: July Indicator Update
and Repositioning Changes
July 1, 2008
Dear Valued Subscriber,
The Core and Focus model portfolios were repositioned after the markets closed on June 30. The current model portfolio compositions as well as
exchange traded fund (ETF) and mutual fund recommendations are available in the Subscriber Login area of the web site.
Market Developments
Reversing gains scored in April and May, the broad market declined through June with the Dow Jones Industrial Average pushing below its January lows. The financial
sector was at the epicenter of the market's decline. Concerns on additional real estate–related write-downs weighed on sentiment and
regional banks came under intense selling pressure.
There was little relief from the Federal Reserve as the central bank focused on inflation and left its benchmark short-term interest rate unchanged. A tighter monetary
stance however provided little support to the dollar and a weaker dollar in turn supported a rally in the price of oil and natural gas.
Repositioning Changes
The U. S. economy either is in recession or is at best muddling along at near-recession levels. The combination of slow economic growth and inflation increases the near-term
risk of stagflation and puts the Federal Reserve in an unenviable position. Current statements from the Federal Reserve suggest that the central bank is focusing more on inflation
than on growth. If the Federal Reserve sticks to this course, the timeframe for economic recovery is likely to be pushed back.
To increase defensive characteristics and reduce economic sensitivity of the model portfolios, we are increasing exposure to medical equipment as well as
oil & gas exploration and production investments while cutting back on software. Sales of medical devices tend to be less susceptible to economic
vagaries and electoral politics. With supplies tight and demand rising, the intermediate-term fundamentals for the oil & gas exploration and production
business remain sound. That said, near-term risks for a correction in oil and gas prices have increased as Asian countries cut back on petroleum
product subsidies and gasoline demand in the U. S. shows signs of declining.
Rating the AlphaProfit Sector Portfolio Indicator 'Buy'.
Following repositioning, we rate the AlphaProfit Sector Portfolio Indicator
'Buy'. Given modest valuation levels prevalent in the U. S. equity market, catalysts in the form of better-than-expected second quarter earnings reports or a change in the Federal Reserve’s policy stance to emphasize growth can conceivably stage a rebound in equity prices.
That said, we do not believe the worst is over either for housing or the financial sector. The Federal Reserve’s recent emphasis on inflation imposes strain on a fragile economy. Such factors can combine with unfavorable seasonality and elevate risks of new yearly lows in equity prices being set in the period ahead. As such, we encourage subscribers to maintain adequate cash reserves in their overall portfolio.
Model Portfolio Performance
Model portfolio returns as of June 30, 2008 are as follows:
| Jun. 2008 | 2Q2008* | YTD* | 1 Year | 3 Year | 4 Year | Sep. 2003 Inception | |
| AlphaProfit Focus™ Model Portfolio | -2.1% | 9.6% | -2.3% | -6.2% | 38.7% | 65.4% | 119.7% |
| AlphaProfit Core™ Model Portfolio | -6.6% | 4.5% | -7.5% | -5.6% | 33.6% | 42.3% | 75.1% |
| DJ Wilshire 5000 Total Market Index | -8.2% | -1.5% | -11.0% | -12.5% | 16.0% | 25.7% | 46.9% |
* 2Q2008 refers to the Mar. 31, 2008 to Jun. 30, 2008 period while YTD refers to the Dec. 31, 2007
to Jun. 30, 2008 period.
Factors driving performance of recommended sectors and industry groups and their investment outlook will be discussed in the July Report due for publication on the 12th.
We welcome your comments.
Best regards,
Sam Subramanian
AlphaProfit Investments, LLC
Ideas. Insights. Results.
http://www.alphaprofit.com
Notes: The AlphaProfit Sector Investors' Newsletter™ is for information purposes only. AlphaProfit Investments, LLC is not soliciting any subscriber to buy or sell any security. Nothing herein should be construed as an offer to buy or sell securities or to give individual advice on investing. Before buying or selling any mutual fund, exchange-traded fund, security, or investment, read the prospectus carefully. For securities held in brokerage accounts, read the broker's specific terms and conditions which apply to trading of the securities. AlphaProfit Investments, LLC cannot and does not give any assurance that the present or future model portfolio changes will be profitable. Past performance is not a guarantee for future results. Factual material is obtained from sources believed to be reliable and is provided without warranties of any kind. AlphaProfit Investments, LLC is not responsible for any errors or omissions. AlphaProfit Investments, LLC neither is associated with nor receives any compensation from any of the mutual fund companies, brokers or entities connected with the exchange-traded funds mentioned in the newsletter. Please review our Terms and Conditions of Use and Subscriber Agreement which is available on our website at www.alphaprofit.com; they govern your relationship with AlphaProfit Investments, LLC, including, but not by way of limitation, use of this newsletter. No part of the AlphaProfit Information may be reproduced or re-transmitted in any manner without written permission of AlphaProfit Investments, LLC.
Copyright © 2008. AlphaProfit Investments, LLC. All rights reserved.