Another year in the rear view mirror! It was a roller coaster ride, with geopolitical upheaval, growing government debt, Europe in disarray, disengagement in Iraq, the death of Osama Bin Laden, year-round political campaigning and then there was you and me, trying to make sense of it all.

 

The Dow Industrials grew 87% from the low in March of 2009, proving that the market really does climb a wall of worry. Meanwhile, our benchmark PCM account is up 128%, considerably better than the major indices and our old friend, Warren Buffet. How have we done that?We sorted thru possibilities and selected stocks our research indicated might outperform the market.Some haven't, most have!

 

Apple (AAPL), though strong, had some ups and downs. Losing Steve Jobs this year to cancer distressed many investors, but it’s clear that he left the company in good hands. ’ guidance to his successor and workforce was to never ask what he would do, but to "do what's right". advice for his company, and Congress too! According to industry analysts, the iPad 3 is just weeks away, and Apple is poised for one of its best years yet.

 

BHP Billiton (BHP) gives us broad representation in natural materials and is significantly undervalued. Southern Copper (SCCO) gives us a 9.3% dividend yield while we wait for an inevitable resumption in housing and infrastructure construction. Caterpillar (CAT) is increasing revenue and earnings, in spite of a worldwide recession. CAT is rapidly growing and undervalued.

 

Sangamo Biosciences (SGMO), my long-term favorite, has been affected by hedge fund selling since early 2011. Remember, hedge funds are generally impatient, short-term traders, and most of them aren’t very good at it. After making more than $15 billion for his investors in 2008 (with the benefit of illegal, insider information) hedge fund manager, John Paulson, has lost more than half of his fund’s value in 2011, including a $5 billion loss in China forest company, Sino-Forest. Sangamo’s science is solid, and will change the course of human history. We’re getting by with other investments while we wait for this one to payoff. Look for SGMO to rebound in 2012.

 

Our Index ETF investments in the NASDAQ, Russell 2000 and S&P500 have allowed us to benefit from the effects of monetary policy on markets, even though economic growth remains moribund from government, debt, regulation, and tax policy. Small Cap and technology stocks will outperform as the economy gains traction. We’re well represented with our current picks.

 

We took a break from adding several stocks, including Oracle (ORCL) and Texas Instruments (TXN), to accounts during 2011; however, I anticipate acquiring more of their shares in the months ahead.

 

The outlook for 2012 looks better than investors might expect.For now, I plan to stick with most of our investments, but will remain alert for changes when necessary.

 

I enjoy talking with all of my clients at PCM so please call if you want to chat, or if your situation changes in any way. Kathey and I are here to be of assistance so don’t hesitate to call on us.It’s been a pleasure serving you in 2011 and I am enthusiastic about doing the same in 2012.

 

We at PCM wish you the best of health and prosperity in 2012. Happy New Year!

         

– Dan

 

                

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4th Quarter 2011

,Saturday December 31, 2011