Strategy Update – July 2012Submitted by Stonebrook Capital Management on June 28th, 2012
“Look at market fluctuations as your friend rather than your enemy; profit from folly rather than participate in it”
We were reminded of Mr. Buffett’s sage advice during last quarter’s market correction, which brought down the S&P 500 nearly 11% from the April 2nd high. While we are aware of the serious challenges facing the global economy and the need to protect portfolios from major declines, we think it is equally important to take advantage of the opportunities created by the uncertainty. During the second quarter, we were able to invest in some outstanding companies at very attractive prices.
Long term investors are rewarded by making purchases when shares are attractively valued, not when economic forecasts are optimistic. We continue to see attractive opportunities. We started a position in Cerner Corporation, a software company involved in the digitization of health care records. Cerner benefits from being the market leader in a sector that is seeing rapid growth due to efforts to control costs in the healthcare industry. We also added shares in BB&T Corp, a regional banking company in the Southeastern US. BB&T has exposure to housing, which we think has made a durable bottom, but unlike larger banks, its exposure to Europe is minimal. We also added several other dynamic companies that we expect to be outstanding investments.
Our managed portfolios had solid gains in the first half of the year. We look forward to further gains in the second half. We are mindful of the risks to the global economy, but are also encouraged by the attractive valuations that we see in equities.