East Coast Asset Management Clients and Interested Parties
Second Quarter 2013 Update – Yielding to the Still Point
In our second quarter letter you will find an update on our portfolio and general market observations. Each quarter we highlight one component of our investment process. This quarter, in the section titled Yielding to the Still Point, we will discuss some of the intangible attributes that we believe lead to intelligent investment decisions. As is our standard practice, client reporting, including performance and positioning, will be sent under separate cover.
The tailwinds of valuation and monetary policy continued to support strong returns in the U.S. equity market. For Q2 2013, the S&P 500 (INDEXSP:.INX) returned 2.92%. The emerging market indices were weak for the quarter as growth has slowed and social and economic unrest has heightened in China and Brazil. The MSCI World Index returned -0.22%, the MSCI Emerging Markets Index returned -7.77%, and the MSCI EAFE Index returned -0.77%. Fixed income also suffered, the Barclays Aggregate Bond Index returned -2.33%. The ten-year U.S. Treasury yield spiked nearly a full percentage point during the last few weeks as some economic indicators validated a stabilizing economy. While prices of equities move higher, we continue to feel our evolving portfolio of businesses offers attractive expected returns, and provides one of the few places to protect accumulated wealth against the loss of purchasing power.
A number of tailwinds present in our portfolio provide us with some comfort that our returns from today’s prices should prove quite satisfactory. We will expand on our observations in the following sections.
East Coast Asset Management’s Yielding Fluidity:
When we founded the company nearly five years ago we chose to include a cresting wave in our logo. This choice carries a lot of meaning, yet we have not put words to its significance.