Wutherich & Co. December 2012 Newsletter

Wutherich & Co. December 2012 Newsletter

by wilwutherich on January 3, 2013 · 0 Comments

Monthly Message
Happy New Year! December was a positive month for the major market indices. The S&P 500 was up 0.9%, the DJIA up 0.8%, the NASDAQ up 0.3%, the S&P/TSX up 1.9%, while the BMO Small Cap Index was up 2.8%. The Wutherich & Co. Composite was up 2.4% during the month and 17.1% during the year. Markets have continued to react violently to every headline coming from the U.S. budget talks and will probably continue to do so as many problems still need to be addressed. In the meantime, the American economy continues to show modest but steady improvement. Despite all of this noise and uncertainty, we think most of the companies in the Wutherich & Co. Composite are well positioned to continue grow and we will be buying more of them if they suffer any weakness. In recent months, we have given examples of resilient companies that reside in our portfolio. This month’s example, Total Energy Services, is more of a “growth cyclical” than a pure growth story. As with many names in the portfolio, we have owned it for a long time. In fact, we have held this stock for two periods going back to February of 2001. In the first period, the stock appreciated 13-fold. Our current holding has seen its value triple. The company provides the oil & gas industry with a variety of services and has done so profitably for at least 16 years. In fact, in the last 10 years, profits have increased nearly ten-fold. This, despite wild swings in the overall oil & gas market. Management have proven to be good stewards of capital, frequently spending when times are bad and saving when times are good resulting in a 10 year average return on equity of 22%. We would also like to notify all of our prospective clients that we will be raising our minimum account size to $250,000 on January 31, 2013.
The following table illustrates the performance of the Wutherich & Co. Composite to the present:
(unaudited, since Sep.30/01)*

	Month	1YR	3YR	5YR	10YR	Inception
Wutherich & Co.	2.4%	17.1%	17.3%	5.3%	13.5%	15.2%
BMOSCI-wtd	2.8%	2.5%	6.8%	2.6%	10.2%	10.5%
S&P/TSX	1.9%	7.2%	4.8%	0.8%	9.2%	8.0%

Wutherich & Co. Factsheet
Company Objective
Our goal is to seek prosperity for our clients through participation in stable, growing companies in North America, led by strong management teams that we consider our partners for the next five or more years.
Investment Philosophy
Our style can be described as concentrated, disciplined, long-term growth stock investing. The focus is on established companies that generally have a demonstrated track record in revenue, cash flow or earnings per share growth, with strong managements and solid balance sheets. The current emphasis in the portfolio is on the equity of small to medium capitalization companies, defined roughly as $50 million to $5 billion in market capitalization. The portfolio may include large capitalization companies if the right elements are there. Stocks are bought with a keen eye to valuation, so you’re not likely to find many high multiple stocks here. The portfolio will likely maintain a significant percentage in foreign securities, providing exposure to investment returns outside of Canada.

Portfolio Composition (as a percentage of net assets)
Canadian Stocks		73.16%
	Energy	19.93%
	Financials	0%
	Information Technology	0%
	Communications and Media	0%
	Consumer	6.66%
	Healthcare	6.67%
	Industrials	27.32%
	Materials	6.40%
	Telecom	0%
	Transportation	6.17%
	Utilities	0%
U.S. Stocks		17.43%
	Communication Services	6.86%
	Energy	5.27%
	Specialty Retailers	5.30%
Cash and Others		9.41%

Performance

(unaudited, the growth of $100,000 invested as at Sep. 30/01)*

Your account with us

Wutherich & Company is an independent investment counsellor. We do not hold assets for our clients, but simply exercise trades over your account as per an agreed upon investment policy statement and portfolio management agreement. Your account is held at TD Waterhouse Canada Inc. in your name. Withdrawals from that account can only be sent to you at your designated bank account and/or address of record. Wutherich & Co. may also do withdrawals from your account to satisfy any fees that may apply to your account. All accounts are cash accounts. Unlike hedge funds, we do not use leverage or derivatives to manage your money. Also, we are not a fund company – if you are a private investor with us, your account will mirror the Model Portfolio but your investments are not pooled.

Other Facts

	Annual fees are 1.5% of assets on a quarterly basis in arrears, plus applicable taxes.
	Institutional clients qualifying for a segregated fund account would be charged 1% for the first $10 million and 0.5% for the next $40 million.
	Fees on any accounts over $50 million would be subject to negotiation.
	Minimum account size is $250,000.
	Investments are 100% RSP eligible.

*The Wutherich & Co. performance shown here is of a composite which combines the performance of all of the accounts managed by Wutherich & Co. that have been invested according to the Wutherich & Co. Portfolio throughout their history. These accounts vary greatly in the size of assets that they contain and whether or not fees have been deducted directly from the accounts during their history. BMOSCI-wtd = BMO Small Cap Index, Total Return, weighted. This index is currently the most comparable to the Wutherich & Co. portfolio due to its average market capitalization, though it may differ greatly in its sector weightings; TSX = S&P/TSX Total Return Index. Due to its large capitalization nature and substantially different sector weightings, this index may not be considered comparable to the Wutherich & Co. Portfolio.