The intense share price volatility of the past few months continued throughout August with nagging North American concerns relating to Fannie Mae, Freddie Mac and Lehman Brothers as well as weakening commodity prices and the precarious hedge fund situation.
Four of our five ABC Funds, nonetheless, showed positive investment returns for August. Although we expect a continuation of extreme volatility for the balance of 2008 we believe that there is so much negative investor psychology and fear baked into the marketplace that a major share price upturn could transpire at anytime. While securities markets remain very challenging we are comfortable with our holdings. Furthermore, we initiated a five point investment plan to take advantage of market opportunities in preparation for the next market cycle upturn. We remain proactive and look upon the present uncertain market conditions as an excellent opportunity to restock our investment portfolios with significantly undervalued equity positions.
ABC Five Point Investment Plan
- Maintain adequate liquidity for opportunities. Our five ABC Funds collectively hold, at this time, a short-term cash position of over $120 million. This amount comprises the recent receipt of $43.750 million from the Saxon Energy takeover as well as profit-taking from our sales of Keynote Systems, Village Super Market and Unum Group. At the same time we are patiently adding to several new and existing undervalued securities.
- ABC client redemptions have been relatively light. We attribute this to our serious ongoing efforts to inform our clients via our two web sites, our monthly value line telephone commentary and the constant availability of our ABC team to answer all client telephone calls and e-mails. We will continue to provide excellent client and prospective client support via website upgrading and telephone/email communication.
- We continue to consolidate our ABC holdings by reducing the number of securities on market strength. We are trying to take advantage of extremely erratic and emotional markets. We remain very opportunistic with regard to both buying and selling securities. We are aiming to be tax effective by matching profitable securities proceeds with selective tax loss selling.
- We are attempting, where possible, to increase portfolio dividend and interest income through prudent purchases and opportunistic sales (e.g. Keynote Systems, Village Supermarket, etc.)
- Above all, with our present cash reserves we have the flexibility to be opportunistic in our search for dirt cheap stock selections. We are presently preparing our portfolios for the next stock market upturn. We regard the present chaotic market conditions as an excellent opportunity to upgrade our ABC portfolios.
Irwin A. Michael, CFA
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