Manager Commentary
As advisor to the funds, Litman Gregory regularly engages in detailed discussions of individual holdings with each of our managers, and we invite the managers to share updates on a few of their holdings in our annual and semi-annual reports. Below are some of these discussions included in the current Annual Report to Shareholders.
Opportunistic Income Strategy Highlights by DoubleLine Alternative Strategies Fund
The portfolio returned 3.9% for the fourth quarter (net of our sub-advisor fees). During the quarter, the Agency MBS component of the portfolio outperformed the non-Agency component. On the Agency side, the portfolio prices remained fairly constant so the return was accomplished by the earning capability of the securities. On the non-Agency side of the portfolio, prices went down slightly more than the income generated by these securities. The PrimeX and ABX Indices reflect price action in various sectors of the non-Agency market (see Table 1 in the report). The reason for price depreciation in the non-Agency mortgage sector would be a continuation of the "risk-off" trade in that sector. Continue reading on page 57.»
Blackstone Group L.P. by Dick Weiss Equity Fund
Blackstone Group L.P. (BX) is one of the largest and most successful of the alternative asset management companies in the world. It is a leader in the management of private equity funds, real estate funds, fund of funds investing in hedge funds, credit-related vehicles and some closed end funds. Aside from being one of the industry's largest entities as measured by assets under management, the company has been a pioneer within the industry going public at $30 per share in June 2007. As has been characteristic of BX, the timing was impeccable for the company if not the public shareholders, as the stock fell to 5 in the 2008 market collapse. Having raised capital just before the market collapse, the company has emerged as one of the leading beneficiaries of the financial disruptions of the last few years. Continue reading on page 15.»
FedEx Corp. by Clyde McGregor Equity and Value Funds
Having just gone through the holiday season, readers of this report are probably familiar with FedEx, especially its overnight package delivery service. Yet, the company's growth is coming from its domestic ground shipment service, as well as trans-Pacific parcel delivery. We believe that FedEx's enormous investment in infrastructure over the past decade will pay off in higher returns for shareholders, especially should fuel prices decline. FedEx has spent its first 40 years building a logistics network. The strength of this network is the company's "moat" or protection against new competitive threats. Continue reading on page 34.»
CVS Caremark Corp. by Christopher Davis/Kenneth Feinberg Focused Opportunities Fund
CVS Caremark Corp. is one of the two dominant retail pharmacy chains in the U.S. (tied with Walgreens at ~20% share of retail drug purchases) and is also a leading pharmacy benefit manager (PBM) helping employers and health plans manage and reduce their drug spending. We like the fact that both of CVS's segments are large beneficiaries of the trend to drive low-cost generic alternatives as a first step to address chronic health conditions like high blood pressure, cholesterol, and diabetes, which help avoid the much higher-cost episodes of care at hospitals that drive so much of the soaring healthcare inflation we see today. Continue reading on page 51.»
MercadoLibre, Inc. by James Gendelman International Fund
MercadoLibre, Inc. ("MELI") is the largest e-commerce retail platform in Latin America. We believe MELI to be an attractive way to access the rapid internet adoption and increased retail spending in the region. MELI has operations in 13 countries -- the top four markets being Brazil, Argentina, Venezuela and Mexico. eBay currently owns 18% of the company and is MELI's exclusive partner in Latin America. MELI's business however, is more similar to Amazon.com, in that most of its products are new and sold at a fixed price, rather than eBay's auction site. We believe MELI's business will grow through increased high speed internet availability, expansion of types of goods sold, and adoption of the company's online payment services. Continue reading on page 24.»
Clean Harbors, Inc. by Tucker Walsh Smaller Companies Fund
Clean Harbors, Inc. (CLH) is an earnings growth story with attractive cyclical and secular tailwinds. The company is a leading provider of environmental, energy and industrial services in the United States and Canada. CLH's core business is collecting, transporting and disposing of mostly hazardous waste for customers in the chemical, refinery and general industrial markets. The company also provides emergency response services for events such as oil spills. CLH has a leading market position and a reputation for safety and regulatory compliance that serves as a competitive advantage relative to smaller competitors. Continue reading on page 42.»