Will the Residential Real Estate Recession pull down the US Economy?
By Clark A. Kendall

Fresh off a robust 2006 when every major U.S. equity index produced double digit gains, investors encountered a bit of a reality check in the first quarter of 2007. The closing act of 2006 produced gluttonous fourth quarter returns in the form of 6% plus returns for the S&P 500 and the DJIA, but these excesses have vanished for now as some familiar bearish themes have taken center stage once again. Fears of a slowing economy, inflationary concerns, and a weak housing market coupled with increased market volatility limited gains to most U.S. indices. Large cap markets barely moved off their year end numbers and once again trailed their small and mid counterparts. Mid cap stocks along with value were the clear winners of the quarter with the Russell Midcap Value producing gains of 4.86% and leading all domestic indices.

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Alternative Portfolio Strategy
By Paola Saenz

Kendall Capital Management has recently created a new investment strategy that offers our strong underlying fundamental research in a portfolio that is less correlated with the S&P 500 than our other investment strategies. Our philosophy is to optimize a risk-reward profile by investing in a mix of foreign and domestic equity and fixed income securities.  We know that domestic and international asset classes often behave differently (uncorrelated) in various economic environments which used with our other investment strategies gives investors the benefit of higher expected rates of return with lower theoretical risk

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529 Plans: A Powerful Estate Planning Tool

What is a 529 Plan:
It's an education savings plan operated by a state or educational institution designed to help families set aside funds for future college costs. As long as the plan satisfies a few basic requirements, the federal tax law provides special tax benefits to you, the plan participant (Section 529 of the Internal Revenue Code).

What can a 529 Plan Mean to You?
529 plans are similar to Roth IRAs in that a taxpayer reaps no federal tax deduction for making the contribution, but beneficiaries of the plan (the child or grandchildren) pay no tax on withdrawals from the account as long as the funds are used for his or her qualified educational costs, e.g., room and board, tuition, books, supplies.

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Income & Growth

The distinguishing feature of our Income & Growth Portfolio is its consistently high level of current income, comprised of interest and dividends paid to investors regardless of market conditions.  The first quarter of 2007 in the stock market can only be characterized as relatively flat.

The Income & Growth Portfolio has a current yield of 4.2% as compared to the current yield of 1.8% for the S&P 500 and 4.75% for a 10 year Treasury note.  One benefit of having a high current yield is that it helps protect the Portfolio during down periods by contributing to total return with income generated from interest and dividends.

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Kendall Capital’s GARP Portfolio (Growth At a Reasonable Price) is based upon our bottom up security selection investment strategy.  We view the GARP Portfolio not as a portfolio of stocks, but rather as a portfolio of companies that we expect to hold over time to realize their intrinsic value.  We increase and decrease our exposure to each individual company by simply buying and selling shares in the open market.   The underlying fundamentals of the GARP Portfolio have performed well with revenue growth of 18% and earnings growing at 21% over the past four quarters.

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Recent Stock Selections

Boeing Company (BA - $88.91)

Forest Laboratories, Inc. (FRX - $51.44)

Walgreen Company (WAG - $45.89)

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