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MarketWise Newsletter for August 30, 2002 Hey Folks, Greetings from gloriously rainy southern Kill Devil Hills. Having ridden by the North Pond on Pea Island the other day only to see it nearly totally dry, the rain is much appreciated! Late August is one of my favorite times of year. The tourist juggernaut has thrown the best it can muster for that year at our little strip of sand, and the traffic-weary natives' thoughts begin to return to the reasons we moved to the Outer Banks in the first place: World-class fishing, uncrowded beaches, powerful waves, breathtaking sunsets--with maybe a bit of solitude thrown in for good measure. Here's hoping the fall bite is a good one, the hurricanes stay at sea (and don't move too fast once they're in our swell window!) and the good ole' OBX goes back to having that comfortable feel that only it can have. A sincere "thank you" to everyone who has written with kind words regarding the newsletter and Dare Capital Management and Advisory. As for the somewhat presumptuous newsletter title, the editor of a local publication suggested it. I hope that I am able to make a decent attempt to live up to the title's implied grandeur and add some value to your search for an investment advisor as well. Feel free to email or call with your comments and questions. In this issue: 1. Model Portfolios Initiated. I am putting the finishing touches on three model portfolios: Fixed Income, Dividend Value Equity, and 21st Century Growth Equity. I have enclosed a brief description of each portfolio as well as some of the portfolio's goals and attributes. Beginning with next month's newsletter, I will provide performance stats on each of the three portfolios. As a side note, using a discount broker such as Ameritrade Advisor Services makes it very cost effective to assemble a diversified portfolio! A. Dividend Value Equity--launched August 26, 2002. The Dividend Value Equity Portfolio is a concentrated stock portfolio consisting of positions in 27 companies at present and size parameters limiting portfolio holdings to between 15 and 35 companies. The goal of the portfolio is to invest in the stock of strong, growing companies throughout the US economy that pay above-average dividends to their shareholders. Low price-earnings (PE) ratios, strong management, and a conservative financial structure are also priorities. The portfolio has a cumulative dividend yield of 2.94 percent (not bad in this interest rate environment!), a cumulative PE ratio of 17.22, and a three-year average earnings growth of 14.31 percent. The largest sector weightings are banks, financials (including insurance, savings and loans, and money managers) and gas and electric utilities. The top five holdings for the portfolio as of 8/28/02 are Philip Morris (MO), Equity Office Products (EOP), Bank of America (BAC), First Virginia Banks (FVB), and Anheuser-Busch(BUD). Email or call me if you'd like more information about this portfolio. B. 21st Century Growth--launched August 26, 2002. The 21st Century Growth Portfolio is a concentrated stock portfolio consisting of positions in 34 companies at present and size parameters limiting portfolio holdings to between 25 and 45 companies. The goal of the portfolio is to invest in the stock of strong, growing companies throughout the US economy that have excellent prospects for growth in coming years. Many of the companies are in old-line businesses in high-growth areas of the country, hold a commanding position in their sector, or have built their business model around an innovative product or service. A good percentage of companies in the portfolio pay dividends or have fairly low PE's, although a few are more "pure growth" plays that do not pay dividends. The portfolio sports a dividend yield of 1.82 percent (greater than the dividend yield for the S & P 500 and not too shabby for a "growth" portfolio!) and a three year average earnings growth of 16.09 percent. The largest sector weightings are financials (including banks and savings and loans), technology, and healthcare. Top five holdings for the portfolio as of 8/28/02 are Duke Power (DUK), Sysco Foods (SYY), Pfizer (PFE), Tyco (TYC), and General Electric (GE). Email or call me if you'd like more information about this portfolio. C. Fixed-Income--launched August 28, 2002. The Fixed Income Portfolio is a collection of several of the top professionally-managed bond mutual funds, each having a different focus or specialty. The funds share outstanding management, a history of outperforming their peers, and low expense ratios. The portfolio carries an average expense ratio of .42 percent and has returned an average of 6.69 percent year to date. Email or call me if you'd like more information about this portfolio. 2. 401-K Plans for self-employeds and owner/spouse-only businesses. The 2001 Tax Relief Act included a windfall for self-employed folks and businesses that employ only owners and their spouses: The ability to enjoy the tax advantages of a 401-K plan. Contributions to such a plan are tax-deductible to the business and grow at a tax-deferred basis until withdrawn. Most significantly, 401-K plans allow annual tax-deferred contributions of up to $40,000 for those under age 50 and $41,000 for those 50 and above. Happy Day! I have been fortunate enough to locate an independent third-party administrator (TPA) that facilitates the plan and will even allow rollovers of other retirement vehicles (ie IRA's SEP's, Keogh's) into their plan. Additionally, the amount contributed can be controlled by the participants each year, and can vary, from $0 to the maximum permitted for the applicable income. Set up costs are reasonable, especially considering the tax deferrals and savings. Intrigued? So am I! I plan to "kick the tires" on this exciting program over the next few weeks--feel free to call or email me for more information, and stay tuned for further details. 3. Market Commentary. The markets have enjoyed a five-week low-volume "summer rally" off of the July 24 lows. Nothing to get wildly excited about, as no long-term downtrends have been broken, but in the current environment we'll take what we can get, no? Those of you that have been reading my work for a while know that I use technical analysis as well as fundamental analysis to interpret market behavior. The technicians in the crowd seem convinced that the markets are due for a retest of the July lows in order to form a bullish "double bottom" pattern. Given that September is traditionally the worst month of the year for equity market performance, and that the mutual funds close their books for the year in October (giving rise to increased selling of losing positions by fund managers) I would tend to agree with the technician view, and would venture that the next market turn will be a downward one. See "Charts" below for more detailed information. That said, stocks are cheap! I think that investors with three-year or longer time horizons may be well-served to do some sniffing around over the next few weeks, as the market is still oversold on a long-term basis. Think quality, quality, quality, and try to buy companies selling at a discount to the market, IMHO (in my humble opinion). 4. Charts. A: This is the S and P 500, which closed at 917.5 on July 28th
B: This is the Dow, which closed at 8694 on July 28th
C: By request, this is a chart of Pfizer (PFE) which closed at $33.11 on August 28, 2002.
Disclosure: I own Pfizer personally and in client accounts. 5. Practice update: The Certified Financial Planner preparatory process that I am enrolled in continues, with me on schedule to take the CFP exam in March of 2003. The program is quite rigorous (bordering on Draconian) but has undoubtedly enhanced my planning skills. I am pleased to report that the bridge linking Roanoke Island and the NC Mainland opened on August 16, 2002. At 5.2 miles in length it is the longest bridge in North Carolina. Its opening is a certifiable "Red Letter Day" for those traveling between the Outer Banks and Wilson, Chapel Hill, Goldsboro, etc. I plan to be inland several times throughout the fall and am available to meet with clients throughout eastern NC and southeastern Virginia--or, better yet, take the opportunity to come to Nags Head and we'll have a nice visit. Yours truly, Will W. Woodard, III, CFP® Will Woodard is president of Dare Capital Management and Advisory, an independent Registered Investment Advisor and fee-only financial planning firm based in Kill Devil Hills. Will's firm specializes in professional, highly personalized investment management and planning services. Will can be reached at will@darecapital.com or (252)480-9535. "Clients and Friends Newsletter" is published monthly by Dare Capital Management and is free of charge. To subscribe, send your email address to will@darecapital.com and put "subscribe newsletter" in the subject line. All of the foregoing is commentary for informational purposes only. All statements and expressions are the opinion of Will W. Woodard, III and Dare Capital Management and Advisory, and are not meant to be a solicitation or recommendation to buy, sell, or hold securities. Dare Capital Management and Advisory is registered in the State of North Carolina as a Registered Investment Advisor Firm. The information presented herein and the company's web site has been obtained from sources believed to be reliable, but its accuracy is not guaranteed. The security portfolio of Dare Capital Management and Advisory may, in some instances, include securities mentioned herein and/or on the company's web site. Positions in securities mentioned will be disclosed at the time of publication and may be subject to change at any time without further notice. Estimates, assumptions and other forward-looking information are subject to the limits of forecasting. Actual future results may vary for many reasons. |
