Gimbal Capital Management Balanced Strategies June Update

July 3, 2012

 

 

Gimbal Capital Management

Balanced Strategies Update

 

 

Index

June

S&P 500 TR

 4.12%

Corporate Bonds

 0.43%

Treasury Bonds

-0.33%

Best & Worst Sectors

Pharma       6.73%
Oil & Gas

6.67%

Healthcare

6.09%

Cyclical

1.90%

Technology

1.97%

Commodities

2.56%

 

Fears of a European catastrophe eased in the last week of June, leading to strong market performance for the month.  Sector leadership was unusual for a strong month, with defensive industries, such as pharmaceutical, oil & gas, and health care, leading the way.  We believe that this shows a lack of conviction behind the market, because investors seem to believe that stocks are a better value than bonds but remain unwilling to bet on a strong recovery.  Corporate bonds had a positive return while government bonds had a negative return during June, as the flight to safety reversed course.  Sector rotation has been rapid, and no strong trends have yet emerged.  We are happy to report gains for the year to date and are working to regain ground against the benchmarks.

 

December 31, 2011 through June 30, 2012

     

Income

 

Growth

 

Opportunity

S&P 500 TR

             9.49%

x

50%

x

70%

X

100%

Citi BIG Corp

4.60%

x

 

 

30%

 

 

Citi BIG Treasury

  1.48%

x

50%

x

 

 

 

Composite Benchmark

 

=

       5.60%

=

8.11%

=

9.49%

Composite   Total Return, Net

 

 

       3.29%

 

2.45%

 

3.46%

Composite   Asset Allocation (Stocks/Bonds/Cash)         46/40/14  

66/23/11

 

     66/20/14
Tax-Equiv.   Yield (Interest & Dividends)            4.31%

 

3.01%

 

1.40%

 

During June we sold core positions in Microchip, Government Properties, Eaton, and Ingredion (Corn Products).  We bought Verizon, Radware, and Immersion, which in addition to Apple round out our holdings in mobile technology.  Euro weakness has led to dollar strength, which has battered commodity shares.  Believing that investors have sold down these companies too far, we bought Teck Resources and Darling in our higher risk strategies.  Our actions during June resulted in lower equity allocations and elevated cash levels.

 

Renewed crisis inEuropeand chaotic expectation forU.S.fiscal policy have weakened economic conditions worldwide.  Despite this, stock valuations are reasonable, and our “durable demand” investment theme has resulted in the addition of companies in the mobile technology sector.  Weak demand and dollar strength have resulted in attractive valuations for many commodity-based businesses.  On the other hand, short term economic indicators are fading and we are concerned that second quarter earnings reports may disappoint.  In times like these, we remind ourselves that opportunity losses are easier to tolerate than real losses, and that we will act first to protect our clients’ portfolios, and secondly to grow them.  We will remain diligent and patient as the economic situation develops.

 

Please contact us if you have questions, or are interested in discussing investment strategy.

 

Sincerely,

 

 

 

Daniel A. McAdams

Chief Investment Officer

 

 

Legal Disclosure

Gimbal Capital Management (GCM) is an investment advisor registered with the State of Michigan. Nothing in this letter should be interpreted as financial advice because we cannot know who is reading it, and therefore cannot give personal advice. Any performance noted is net of all fees and expenses, but you will still have to pay taxes, which we don’t show, because we don’t know your tax bracket.

Like your favorite uncle always said, there is no such thing as a free lunch, and investing is no different. Any potential for profit will also bear the risk of loss, and expenses will be charged to you regardless of profit or loss.

Like your father always said, do your homework before you invest. We do our homework for the money we manage, and you should research us before you invest with us. You can find more information at www.adviserinfo.sec.gov.

Like your mother always said, if it sounds too good to be true, it probably is. We think we are pretty good at what we do, but who doesn’t think that they are better than average? We won’t always be right – we will just try to be less wrong than the market.

Like Heraclitus of Ephesus said, “You cannot step twice into the same river.” Past returns may depend on strategies no longer practical, and neither past returns nor “Top Gun” awards guarantee future profits.

Like Will Rogers said, “Common sense ain’t common.” That’s why the fine print exists and why we should have listened to our parents when we were kids.