Equity Rise - Real Estate Falls
By: Clark A. Kendall

Equity markets roared in the second quarter. The S&P 500 Index rose 6.28 percent, hitting an all-time high, and the Dow Jones Industrial Average registered its longest rally (measured in consecutive up days) in 80 years. Growth stocks outperformed value stocks in the second quarter, bucking a 5-year trend, as investors sought out companies able to grow earnings in the face of an economic slowdown.

Three key factors pushed equities higher last quarter:

• Corporate buyouts and share buybacks
• Central Bank Activity (both here and abroad)
• Housing slowdown

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Funds of Mutual Funds Portfolio: Knowing When to Sell
By: Paola Saenz

The objective of our fund-of-mutual funds strategy is two-fold:

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GARP Portfolio: Managing the Mergers

The GARP Portfolio continues to own financially strong companies growing sales and earnings faster than the broad market—and to own these companies at reasonable valuations as measured by the price/earnings, the price/cash flow, and the price/sales ratios.

Over the past quarter, three companies within the GARP portfolio were bought out or taken private. This is a testament to the success of our strategy as we have identified those companies that are mis-priced by the market and are eligible to be bought out at premium prices.

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Income & Growth: Adding Agency Bonds to the Portfolio

The focus of the Income and Growth portfolio is to generate relatively attractive current income in the portfolio from the stocks and bonds of financially strong companies and government payers. Over the past quarter, intermediate-term interest rates (defined as interest rates on bonds maturing in 1 year to 5 years) have moved up while short-term interest rates (defined as interest rates on debt maturing in less than one year) have moved down slightly. The fall of short-term rates coupled with the rise in intermediate-term rates has changed the yield curve from “flat” to “normal”. This is generally seen as positive since a flat yield curve can signal a coming recession.

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If you participate in a pension plan at work, you may be offered several payout options when you retire. The form of benefit you choose could be one of the most important financial decisions you ever make.

Defined benefit plans—a crash course

In a traditional pension plan (also known as a defined benefit plan), your retirement benefit is generally an annuity, payable over your lifetime, beginning at the plan's normal retirement age (typically age 65). Many plans allow you to retire early (for example, age 55 or earlier). However, if you choose early retirement, your pension benefit is actuarially reduced to account for the fact that payments are beginning earlier and are payable for a longer period of time.

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Local Investment Professional Named Accredited Estate Planner (AEP)

Clark Kendall, Chief Investment Officer (CIO) and Founder of Kendall Capital Management (KCM), was designated Accredited Estate Planner (AEP) by the National Association of Estate Planners and Councils (NAEPC), which makes him the only investment professional worldwide to hold the three titles: Accredited Estate Planner (AEP), Chartered Financial Analyst (CFA) and Certified Financial Planner (CFP).

"I strive to provide my clients with the highest quality expertise for investing,” said Clark Kendall, “and adding AEP to my list of credentials is reassuring to my clients that they are getting highly qualified guidance and very personal attention. This is a great honor for me.”

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Recent Stock Selections

Cognizant Tech Sol(CTSH - $75.00)

Business Overview:
The Group’s principal activities are to provide IT design, development, integration and maintenance services for Global 2000 companies. The solutions include application development and integration, application management and re-engineering. The customers include ACNielsen Corp., First Data Corp., ADP Inc., CCC Information Services Inc., Metropolitan Life Insurance Company, Computer Sciences Corp., Royal and Sun Alliance USA, The Dun and Bradstreet Corp., and United Healthcare. The Group operated in Europe, North America and Asia. On April 18, 2005, the group acquired substantially all the assets of Fathom Solutions LLC..

Schering-Plough (SGP - $30.44)

Business Overview:
The Group’s principal activity is to discover, develop, manufacture and market advanced drug therapies to meet medical needs. It operates through three reportable segments: Prescription Pharmaceuticals segment discovers, develops, manufactures and markets human pharmaceutical products. Consumer Health Care segment develops, manufactures and markets OTC, foot care and sun care products. Animal Health segment discovers, develops, manufactures and markets animal health products. The Group operates in Europe, Canada, Latin America, Pacific area and Asia. On February 14, 2005, the Group acquired most of NeoGenesis Pharmaceuticals’ assts.

Factset Research Sys (FDS - $68.35)

Business Overview:
The Group’s principal activity is to provide online integrated database services to the global investment community. The Group provides more than 200 databases, including data from thousands of companies from multiple stock markets, research firms, governments that are combined into a single online platform of information and analytics. The Group’s product includes the portfolio returns product names as SPAR (Style, Performance and Risk). SPAR allows portfolio managers to analyze the style, performance and risk of selected portfolios, benchmarks and competitor funds.

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