Roberts Nash Advisory Group

Market Comment

April was another interesting month for The Roberts Group.  On a positive note, you'll find an attachment, where Wellington West has been named top brokerage firm by their advisors during 2004.  This report is especially pleasing to us as we look at the opportunities going forward and realize that Wellington West is prepared for the future.

On April 27-30 Anna-Marie and I were in San Francisco for a top producers conference with Wellington West.  We were very pleased to see the corporate vision and quality of advisor.  Anna-Marie has been named co-branch manager of the London office (subject to regulatory approval), I am on the technology committee and have been asked to be on ACTM (the advisor counsel to management).  We will have an opportunity to help shape this company going forward with the top notch client service perspective that we share.

On a sad note, Teresa decided to move into a new career.  She is going to take a few months to get organized and do some studying at home.  We will certainly miss Teresa and her enthusiasm for getting things organized and we are actively looking for a replacement.  We wish her much success in her new endeavor.

S&P surprised the street, on Thursday (May 5th) with a downgrade of GM and Ford debt to Junk Status.

“Shares of both companies slid more than 5% in the wake of the cuts, one day after rallying when a private investor offered a rich price for a big slug of GM stock. The S&P downgrades also sent broader stock averages down as much as 1% and roiled corporate bond markets, where many fund managers will now be prohibited from owning GM and Ford.”

"This is the beginning of the end of the U.S. auto industry as most people have come to know it," said Sean Egan, managing director of Egan-Jones Rating Co., an independent firm. "In another two years, we're likely to see substantial layoffs and bankruptcy filings by possibly one or both of these companies and massive restructurings of most of the U.S. auto manufacturers." From TheStreet.com.

More bad news for hedge funds last week as Norshield suspended redemptions.  Yes, Norshield manages the Olympus funds, and we are somewhat concerned.  We did expect higher returns out of them and we will probably redeem at our earliest opportunity.  On Saturday, it was announced that Norshield would sell off their hedge fund business to a newly created Calgary company.  This is a good strategy as the concern of some institutions was the lawsuit in which Norshield was involved with Cinar. 

The market has been confusing the bears and the bulls over the last month.  Both offer convincing arguments regarding the market’s direction.  I suspect that we will have a difficult time for a few months.  But I do believe that the economy is good enough for the market to head higher by the end of the year.  We continue to encourage our clients to have enough income from their assets to help the ride through any short-term volatility.

It has long been said that the market's main goal is to confuse the masses into believing something that appears to be there is indeed entirely the opposite. Clearly the up-down-up-down triple digit Dow days are beginning to frustrate both sides of the ledger. Those who view the glass as being half full, are beginning to wonder when we will finally break above this frustrating range and get on with the goal of continuing the bull market. The bears, on the other hand, keep looking for the glass to finally crack but every time they get close to fulfillment, the market turns around with vengeance and reminds them not to get too cocky.”   Reprinted with permission from James Dines & Company Inc

Some of our clients have asked for more specific recommendations than the general comments we were able to make at our predecessor firm.  I would certainly like to do this, but some of our recommendations will be consistent, month after month.  I hope you don't mind.  We also need to divide the recommendations into different categories based on risk level.  Therefore, again, I will put together a list over the next several months and track the results at the end of each year for recommendations within categories of:

Closed-end fund. – buy Strata Income Fund at $15.15 as of May 9th, its NAV is $16.89 as of May 5th.  Redemption at full NAV is available in November with a preferred share, currently trading at $10.40.  There could also be costs of up to $.25 on redemption.  Therefore the discount is $1.09 on $16.24 which equals 6.7%.  Strata currently yields 7.9%.

Conservative equity – buy Eli Lilly  below $60 US.   This Group’s principal activities are to discover, develop and market pharmaceutical-based health care solutions.  The stock has been beaten up over the last five years and has just recently started to outperform the market.  

  • Speculative equity – buy Cameco below $55 CDN.  This is the top uranium play in the world and the price of Uranium has been in a steady uptrend for quite a while.
  • Fixed income alternative – buy Income Streams Capital Yield shares at $17.22.  They are delivering a deferred capital gain return of 4.33% to November 30th, 2013 guaranteed by Merrill Lynch (which is higher after-tax than can be achieved with corporate bonds of similar quality)
  • On another note, the US Dollar still has the potential to be moving towards several months of strength.  (CDN dollar weakness)  As mentioned last month, this will certainly surprise the majority if it happens.

** I have prepared this commentary to give you my thoughts on various investment alternatives and considerations which may be relevant to your portfolio. This commentary reflects my opinions alone, and may not reflect the views of National Bank Financial Group. In expressing these opinions, I bring my best judgment and professional experience from the perspective of someone who surveys a broad range of investments. Therefore, this report should be viewed as a reflection of my informed opinions rather than analyses produced by the Research Department of National Bank Financial **