Recent News & Articles
STONEBROOK – Press Release – 2011
Stonebrook earns Wealth Manager Award – 2nd year in a row
 Stonebrook Capital Management is pleased to announce that it has been awarded the 2011 Five Star Wealth Manager Award. This achievement places Stonebrook among the top 7% of wealth managers in the Chicago area. Stonebrook is delighted to have received the award for a second consecutive year.
To earn this recognition, Stonebrook Capital Management scored among the highest in overall satisfaction in a thorough research survey on wealth managers in the Chicago area. The survey respondents included approximately 1 in 4 high net-worth individuals who were asked to name and assess wealth managers with whom they have worked and know through personal experience. The evaluation focused on the following areas: customer service; integrity; knowledge/expertise; communication; value for fee charged; quality of recommendations; and overall satisfaction. A detailed article on award winning wealth managers appears in the November 2011 issue of Chicago Magazine.
Strategy Update – January 20121
“You can either have cheap stocks or you can have good news, but you can't have both.”- Jim Grant, Grant's Interest Rate Observer
Marked by a steady flow of dismal news and record volatility, 2011 was a difficult year for investors. While the S&P500 was the best stock index (of a bad lot) it still finished the year with a fractional loss. Global markets dropped sharply with the MCSI EAFE index down 14.8%. The Lipper Flexible fund benchmark which consists of mutual funds investing in stocks and bonds both domestically and internationally dropped by 4.7%. Despite the difficult year, the portfolio posted solid profits in the 4th quarter.
Meanwhile, companies continued to grow profits while their valuations became cheaper. Because of this we have been presented with the opportunity to purchase some of the world's best companies at or near their lowest PE ratios. Historically, investors have been rewarded for looking through the bad news and seizing such an opportunity. Over the past quarter, we have bought or added to positions in: Chevron Texaco, Walmart, and IBM, among others. All of these purchases were made close to the lowest PE ratio of the last 5 years. These companies all pay high dividends and we think they will be great additions to the portfolios.
Emerging market equities were punished particularly hard last year, with the MCSI Emerging markets index down 18.4%. We cut our holdings in emerging markets earlier in the year but retained a core allocation. We believe, despite the recent weakness, they provide an outstanding opportunity for investors. According to BCA Research, the annual total return from EM stocks between1970-2009 is 9.9%, much higher than the 3.8% from developed markets. We believe that the high growth EM stocks have become attractive again due to their low valuations and their out of favor status with investors. We are looking to accumulate EM shares.
Strategy Update – July 2011
“The essence of investment management is the management of risks, not the management of returns. Well-managed portfolios start with this precept.”- Benjamin Graham
Benjamin Graham was a very successful money manager who influenced many of the most successful investors including Warren Buffett. Buffett said Graham was the second most influential person in his life after his own father.
We thought about Graham’s ideas on risk management a lot in the second quarter as investor worries about the debt crisis in Europe, Washington’s continued inability to resolve the US debt ceiling and budget deficit impasse, economic policy tightening in China, and some weak economic numbers caused an 8.2% decline in the S&P 500 Composite Index from May 2nd to June 16th. During the decline many of the strongest groups of the last two years such as energy and emerging markets were down more than the broad market. The decline forced us to take some defensive measures, but we’ve retained most of our top performing core holdings and with the market’s recent renewed strength many of these holdings are already back near their highs with some making new highs.
The market weakness gave us the opportunity to buy some outstanding companies at attractive prices. For example, we were able to buy Arcos Dorados more than 20% below its April 2011 high, while the Latin American franchisee of 1,755 McDonald’s restaurants has continued to rack up impressive gains in sales and earnings. We expect the company’s earnings to rise 48% this year.
It now looks as if European leaders have averted a default by Greece. Progress is being made on raising the debt ceiling and dealing with the deficit. Chinese Premier Wen Jiabao indicated in a recent op-ed piece in the Financial Times that China’s money and credit growth had returned to a “normal range”. If so, there would seem to be no need for further policy tightening , increasing the probability of stable growth in China. We think the disaster at the Fukushima nuclear power plant had a large impact on the second quarter US economic numbers and expect this to diminish going forward. Second quarter earnings may even surprise on the upside. Overall, we remain upbeat on both the economy and the world stock markets, but remain vigilant monitoring the risks.
“Stonebrook Capital Management tops Chicago’s Magazine’s A-List
 Stonebrook is proud to announce that it earned a 2010 Five Star Wealth Manager Award as published in the November 2010 issue of Chicago Magazine. It is a unique honor given only to the top 7% of wealth managers in the Chicago area. We are thrilled to be among such a prestigious group.
To earn this award, Stonebrook Capital Management scored among the highest in overall satisfaction in a comprehensive research survey rating the wealth managers in the area. The survey respondents included approximately 1 in 4 high net-worth individuals. Clients were asked to name and evaluate wealth managers whom they have worked with and know through personal experiences. The evaluation stressed the following topics: customer service; integrity; knowledge/expertise; communication; value for fee charged; quality of recommendations; and overall satisfaction.
We would like to extend our sincere thanks for those of you who participated in the survey. Your comments and high praise for Stonebrook Capital Management are deeply appreciated. To all of our clients, we are grateful for your continued trust and confidence in Stonebrook. It is a pleasure working with you to reach your financial goals. Thank you for your business.
If you are not yet a Stonebrook Capital Management client, we would enjoy hearing from you. To learn more about the advantages of working with an investment advisor from Stonebrook, please contact us. We look forward to an opportunity to work with you.
Strategy Update – April 2011
“It is important to note that the combination of a cheap dollar, a very innovative corporate sector and a highly productive labor force have reinvigorated the manufacturing sector, leading to the reindustrialization of the U.S. economy. There is no reason to expect the manufacturing boom to come to a sudden halt. In fact, manufacturing as a share of the U.S. economy has been rising over the last two years, the first time it has done so in the last four to five decades.” -BCA Research Global Investment Strategy
The reindustrialization of America is an important reason for our continuing optimistic view on U.S. stocks. While the S&P 500 index has nearly doubled from the once in a lifetime low of March 2009, we think US stocks remain in a sweet spot because of the slowly recovering economy, accelerating job creation, export growth spurred by the cheap dollar, interest rates near zero, and very low inflation. We are finding attractive opportunities in innovative entrepreneurial companies at reasonable prices. For example, holdings such as Apple Inc. and Chipotle Mexican Grill have performed well, but in our opinion their stock prices still do not fully reflect the rapid growth coming from new products and new markets. We’ve recently added positions in Rightnow Technologies, a producer of customer relationship management software and Tesco Corp, a designer, manufacturer, and servicer of technology based equipment for the oil and gas industry.
Despite our favorable view of the economy and the stock market, we are mindful that risks to the global economy are elevated. High oil prices, revolutions in the Middle East and Africa, and the ongoing crisis in Japan all pose specific risks to global growth. We feel that proper diversification across asset classes and risk management are key in this environment.
As we indicated last quarter, we are quite pessimistic on bonds. We are reducing our bond allocation and shifting the remaining bond investments into areas such as floating rate notes that are less vulnerable to rising interest rates. While we don’t expect the Fed to begin raising rates soon, the first increases could occur earlier than the markets currently expect.
Strategy Update – January 2011
“Never make predictions, especially about the future.” -Casey Stengel, New York Yankees Manager, 1950s
With continuing sovereign debt problems in Europe, Chinese policy makers trying to reign in soaring real estate prices, and continuing high levels of unemployment, Casey’s admonition seems especially resonant today. Never make predictions indeed. Fortunately, investment success does not depend on predicting the future. We think investors can be successful by preparing for potential changes, employing a flexible investment policy, and adapting quickly when conditions change.
After two very strong years, stocks are no longer at the “once in a lifetime” bargain level of March 2009, but corporate earnings have increased dramatically leaving shares at reasonable price levels. We continue to be fully invested in stocks, especially in the US. This is based on attractive valuations, continuing slow economic growth, and very stimulative monetary and fiscal policies. We are more concerned about bonds, which after rising steadily for the past 25 years have recently broken their uptrend and are offering little or no value. Thus, we are reducing bond holdings in favor of less correlated asset classes such as hedge funds, frontier stock markets, and managed commodity futures. When added to portfolios, these assets historically raise overall return and lower volatility. Given valuations and expected returns in stocks, bonds, and cash, we think these asset classes are especially important now. |
