24 Dec The Lato Letter: Volume 2, Issue 16.
To the clients of Padlock, I thank you once again and trust that you are as pleased as I am with your equity returns this year as the equity portion of your portfolio continues to creep up toward a 40% return for the year. As 2013 draws to a close, it will go down as one of the best years in history for the US equity market with returns for most major indices in the mid to high 20% area. The heavily resource weighted Canadian market did not fare as well, with the price of gold and gold stocks weighing heavily on the returns.
After a year of such robust returns, it is very tempting to ring the register and realize the gains across the board. As tempting as that may be, I remain very constructive about the markets for 2014 and will continue to invest the equity portion of clients’ portfolios with that view. I was reluctant to make any adjustments to the portfolios in the last few weeks of the year to avoid realizing further gains but certainly will have an eye out to rebalance the portfolios where needed in the early stages of 2014.
Although the first two paragraphs of this letter speak to my outlook for the equity market, Padlock will continue to employ the bottom up stock-picking approach that has worked so well this year. I continue to feel very comfortable about the holdings in the various sectors but will be looking to trim or switch holdings that are approaching full value and perhaps trending to over valued.
One of the more remarkable aspects to the good returns this past year is that the largest holding in the portfolios, Apple, has had such lacklustre performance. After today’s strong move based on the China Mobile news, the stock is up 6% for the year compared to the S&P 500’s 28% return. I continue to believe that Apple deserves to be the heaviest weighting and that it will carry more than its share of the load in 2014.
Tim Cook, Apple’s CEO agrees and he concludes his letter to employees with “We have a lot to look forward to in 2014, including some big plans that we think customers are going to love. I am extremely proud to stand alongside you as we put innovation to work serving humankind’s deepest values and highest aspirations. I consider myself the luckiest person in the world for the opportunity to work at this amazing company with all of you.”
I too consider myself very lucky to have the support of the greatest and most loyal clients during the creation and ongoing operation of Padlock and also the support of my wonderful family during this time as well. Merry Christmas to those of you who are celebrating and happy holidays and best wishes for a happy and healthy 2014 to everyone.
This information, including any opinion, is based on various sources believed to be reliable, but its accuracy cannot be guaranteed and is subject to change without notice.
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