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January 2013 Performance Review

February 4, 2013

Onward and upward. With a 5%+ jump in January alone it seems this market can’t be stopped, even though all the well-reported problems facing the global investor are only (at best) partially solved. 

All this upside is starting to attract attention. Investors are warming to stock funds again. This tends to happen shortly before market dips, and if bonds continue to slide as stocks rise we would expect to cut back on equities and shift a little more to debt, but currently stocks are still more appealing valuation-wise than bonds are.

Bonds (and bond funds) are doing badly as interest rates rise. While it is good to see rates rise if it is from genuine economic strength, the recent recovery in housing can’t handle significantly higher interest rates because higher interest rates also mean higher mortgage payments. Bond funds were mostly down (except for riskier bonds which posted a 1.3% gain). Investors are scared of rates going up and are leaving government and more investment grade bonds in favor of higher risk debt. 

With our long-term bond stakes (which fall harder than the bond market in general when rates rise) we were not as close as we’d like to the market this month, though considering how weak international markets and especially emerging markets are compared to the U.S., we can’t complain too much.

Our Conservative portfolio gained 1.88% in January. Our Aggressive portfolio rose 3.71%.

Benchmark Vanguard index funds for January: Vanguard 500 Index (VFINX) up 5.18%, Vanguard Total Bond Market (VBMFX) down 0.71%, Vanguard International Index (VTMGX) up 4.44%, Vanguard Emerging Markets Stock Index (VEIEX) up 0.61%.

In general our value-oriented U.S. funds all beat the S&P 500. Our hedges slid as commodities rose on expectations of continued economic strength. Our longer term higher grade bond funds dipped with the bond market though our funds with more credit risk like (DLTNX and MWTRX) did well.

Value oriented U.S. stock funds performed best in January for non-sector funds. Abroad, markets were up as well, though not as much as domestic markets. Energy sector funds were the hottest fund category with an 8% return, followed by healthcare with a 7.6% gain. Financials were third best, up 6.5%. We are in healthcare and financials which helped offset the drag of bonds in both portfolios.

One poor sector of note is precious metals funds (which we do not own). Down near 8% for the month and 25% for the one year, these funds are also down 1.7% annualized over five years. Imagine how crummy these funds are going to do when gold begins to slip. Gold mining…often a bad business in both good AND bad times.

Stock Funds1mo %
Homestead Value Fund (HOVLX)8.59%
Royce Financial Services Fund (RYFSX)8.49%
Health Care Select SPDR (XLV)8.17%
Jensen Value J (JNVSX)7.79%
PRIMECAP Odyssey Growth (POGRX)7.32%
Vanguard Value ETF (VTV)7.23%
Satuit Capital Micro Cap (SATMX)6.36%
[Benchmark] Vanguard 500 Index (VFINX)5.18%
[Benchmark] Vanguard Tax-Managed Intl Adm (VTMGX)4.44%
American Century Utility Income (BULIX)4.39%
Vanguard European ETF (VGK)4.28%
Vanguard Europe Pacific ETF (VEA)3.83%
Vanguard Telecom Services ETF (VOX)3.17%
Vanguard Telecom Serv ETF (VOX)3.17%
iShares MSCI Japan Index (EWJ)2.26%
Scout International Discovery (UMBDX)1.63%
[Benchmark] Vanguard Emerging Mkts Stock Idx (VEIEX)0.61%
PowerShares DB US Dollar Index (UUP)-0.87%
PowerShares DB Crude Oil Dble Short (DTO)-11.66%
Bond Funds1mo %
Doubleline Total Return Bond (DLTNX)0.48%
Metropolitan West Total Return (MWTRX)0.19%
American Century Core Plus (ACCNX)-0.62%
American Century Government Bond (CPTNX)-0.63%
[Benchmark] Vanguard Total Bond Index (VBMFX)-0.71%
Vanguard Long-Term Bond Index ETF (BLV)-1.12%
Vanguard Extended Duration Treasury (EDV)-5.03%