Investment Recap Third Quarter 2013

It appears clear today that Congress will extend the debt limit and thankfully avert a default.   Investors were understandably jittery for the past several days seeing the Congressional follies play themselves out.  Nonetheless, in the third quarter, markets continued to rally and we have managed to keep pace with the markets for both the quarter and the year with equity gains of approximately 20%.


Our portfolios maintain a significant weighting in real estate, construction, and home building, (including REITS).  The sector contributed to our market outperformance a year ago.  This year, due largely to the concerns with tapering (see our last quarterly letter), interest sensitive investments and real estate stocks have underperformed.  Now that the prospect of tapering has been put off, and interest rates are no longer going up, we are quite optimistic that these stocks will finish the year strongly.


Our exposure to small cap stocks has been a very positive factor, as they significantly exceeded the performance of their large cap brethren.  A couple of the smallest capitalization stocks in our portfolio have been the largest contributors to performance. The U.S. stock market has vastly outshined foreign markets the past two years.  Given the health of Corporate America, our outlook for the economy, and current valuation, we see funds continuing to flow into the U.S. equities.