KCM ~ e-newsletter: 2Q2007

	Wall of Worry - Oil Up, Jobs Down
	Today's Bear Market will be tomorrow's Bull
	GARP Portfolio
	Income and Growth Portfolio
	Fund of Mutual Funds Portolio
	Stock Selections

Please forward our Newsletter to any of your friends and colleagues you think may benefit from reading it. This would include anyone who is nearing retirement or who would benefit from objective financial advice.

By: Clark A. Kendall

Stocks around the world were under pressure in the second quarter of 2008 as fallout from the credit crisis, energy prices and economic weakness took a toll. The S&P 500 Index returned -3.20% while the Dow Jones Industrial Average fell 7.4%. But not all broad indexes fell in the quarter. Mid cap stocks generated strong positive returns as did growth stocks. The Russell Mid Cap Growth Index, for example, rose 4.65% in the quarter while the Russell 2000 Growth Index—a small cap index—returned 4.47%.

Things are not as bad as they may seem—and the U.S. stock markets are outperforming most other major markets in the world. Consider the returns of the following international indexes.


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By: Paola Saenz

The stock market is amazingly resilient. The sky is not falling, despite what the pessimists would have you believe. Yes, the Dow Jones Industrial Average entered bear market territory in early July. Yes, oil prices are incredibly high. Yes, June was a really lousy month for stocks. We can’t change all this. But you might be surprised at how fast the stock market can change … for the better. Looking back, the market has recovered remarkably – and quickly – from some notable downturns.


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The GARP portfolio’s underlying focus and strategy is to own companies with unique products and services that are growing revenues and earnings faster than the overall market. We believe that companies growing revenue and earnings faster than the overall market will have long-term superior price performance.

During the calendar year 2007 we emphasized the “reasonable price” portion of the GARP portfolio and by doing so our portfolio’s relative performance to the major indices performed well. For the 2008, we have used the market correction as an opportunity to add unique companies with special products and services that are growing revenue and earnings during the current economic slow down. During the recent stock market down turn the GARP portfolio’s attention has been to own companies with great revenue and earnings potential. The GARP portfolio overall revenue and earnings growth for the past 12 months was 18.7% and 23.68% respectively


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The Income and Growth portfolio’s current yield from interest and dividends at the end of the second quarter was 5.1%—55% higher than the current 5-year Treasury rate of 3.28% and 28% higher than the 10 year treasury rate of 3.97%.

The Income and Growth portfolio offers investors the advantage of not just higher current income but also increasing expected current income for the foreseeable future. Approximately 65% of the assets in the income and growth portfolio are invested in common stocks that are projected to increase dividend payments by approximately 9% per year over the next three to five years, according to the average estimates by Wall Street analysts. The top ten stock holdings of the income and growth portfolio are listed below.


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At Kendall Capital Management we employ six different investment strategies to meet clients’ overall financial goals and objectives. During each quarter, we highlight and review one investment strategy in greater detail. This quarter we are describing the Fund of Mutual Funds Strategy, which is designed to expose clients’ portfolios to the following important factors that determine equity portfolio performance:

A range of capitalization sizes (large-, mid-, and small-cap)
Distinct actively managed styles (value and growth)
Pro-active rebalancing process
Fee-conscience selection of quality mutual funds


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Corning Incorporated (GLW - $20.16) is a global, technology-based company that operates in four business segments: Display Technologies, Telecommunications, Environmental Technologies and Life Sciences. Display Technologies segment manufactures glass substrates for use in liquid crystal flat panel displays. Telecommunications segment manufactures optical fiber and cable, and hardware and equipment components for the telecommunications industry.

ENSCO International Incorporated (ESV - $76.02) is an international offshore contract drilling company. Its operations consist of one segment: contract drilling services. ENSCO engages in the drilling of offshore oil and gas wells in domestic and international markets by providing its drilling rigs and crews under contracts with major international, government-owned, and independent oil and gas companies.

Airgas, Inc. (ARG - $58.72) and subsidiaries (Airgas) is a distributor of industrial, medical and specialty gases (delivered in packaged or cylinder form), and welding, safety and related products (hardgoods), such as welding equipment and supplies. Airgas is a producer of nitrous oxide in the United States, a producer and supplier of dry ice and a supplier of liquid carbon dioxide in the Southeastern United States.


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