Posted
Jun 09 2008, 08:29 AM
by
Vinny Catalano, CFA
excerpts from this week’s report:
Model
Growth Portfolio (MGP)
“Last week’s results of +22 basis points extends the best
relative performance weekly winning streak for the MGP: 10 out of the last 11,
16 out of the last 18, and 18 out of 23 for the year. The MGP’s year to date
alpha now sits at 316 basis points…”
Model
Growth Portfolio (MGP) Re-balancing
“A net
modest increase of 1% in the MGP is being recommended as valuation levels
improve. Moreover, individual adjustments appear to be warranted for the
reasons noted below...”
ETF
Market Monitor
Econ. Sectors & Industries: Energy may have had held the media
spotlight, but Telecomm was a surprise weekly good performer.
Size & Styles: Mid and Small cap Growth (MGP holdings) did
exceptionally well.
Global: Developed Europe survived but emerging markets everywhere
were pounded, especially India and China.
Other: Reversal of prior week (again) with exceptional strength
across the commodity board led by (what else?) Oil.
Expected
Return Valuation Model
“Keeping the BMR estimated fair value range unchanged (at 120 to 140
basis points over the 10 year US Treasury) may have been a close call over
these past weeks but now appears to be the right call as the uncertainty in the
energy markets and the recent bad economic news (Friday’s unemployment data)
has pushed the VIX back into the 20’s range. With that, the fair value zones
are converging around the fair value range in the higher probability $82 to 84
operating earnings levels. And yet despite last week’s sharp decline in
equities and in the 10 year rate, the S&P 500 has moved only modestly
undervalued to 1.22%. Now that fundamentals have moved…”
Moving
Averages Scorecard
“The most notable item this week is the near term directional downgrading
of EEM (emerging markets) to deteriorating. Where it not for Brazil and Russia,
the slide in India, China, and other emerging markets, EEM might be in bearish
territory. The following chart shows its precarious position…”
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