First Quarter 2017

The Global Resources Fund returned 4.00 percent for the first quarter, outperforming its benchmark, the S&G Global Natural Resources Index, which returned 2.77 percent. See complete fund performance here.

Past performance does not guarantee future results. Current performance may be higher or lower than the performance data quoted. The principal value and investment return of an investment will fluctuate so that your shares, when redeemed, may be worth more or less than their original cost.

Strengths

  • Lumber was the best performing commodity this quarter, rallying an incredible 20.9 percent. Lumber has taken center stage of the commodities complex as steep duties will soon be levied on cheap softwood imports from Canada. Prices have hit their highest price since the start of the 2007 housing crash, marking increased consumer demand, supportive demographics, and a robust housing market in North America.
  • The best performing sector for the quarter was the S&P/TSX Composite Diversified Metals & Mining Sub Industry Index. The index rose 9.58 percent on the back of reflation and a pickup in global demand from China, the U.S. and Europe, the world's major engines of economic growth.
  • Fresnillo plc, the world's largest silver producer based out of Mexico, was the best performing stock this quarter, finishing up 29.47 percent. The stock rose on the back of a spectacular quarter from greater than expected earnings as a result of silver prices rallying 12.1 percent.

Weaknesses

  • Crude oil was the worst performing commodity this quarter, dropping 4.75 percent. The commodity had a tough time this quarter as U.S. inventories continually came in greater than expected and key consumers in Asia continually reported lower consumption.
  • The worst performing sector this quarter was the S&P Supercomposite Integrated Oil & Gas Sub Industry Index. The index fell 8.82 percent on the back of hammered profit margins and earnings as a result of volatile and low oil prices earlier this year.
  • The worst performing stock for the week was Rosneft, one of the world's largest oil companies located in Russia. The company fell 12.46 percent on the back of falling oil prices that damaged earnings earlier this year and a falling Russian equity index.

Opportunities

  • Oil prices had a bumpy start to 2017 in spite of OPEC members' agreement in November in 2016 to drastically cut output. In January it was evident that members of the organization were complying with the agreement and aggressively cut output by 1 million barrels per day (bpd) observed by the International Energy Agency (IEA). Fast forward to today and the IEA has stated that the oil market is very close to fully being in balance. Oil stocks across OPEC members fell by 17.2 million barrels in March versus stocks being up by 38.5 million barrels for January and February, a very positive indicator for crude oil fundamentals.
  • In December of 2016 we mentioned that despite potential negative headwinds, China avoided a hard landing last year as a result of robust monetary and fiscal stimulus. As the first quarter of 2017 is now behind us, China GDP continues to come in much stronger than what the consensus is forecasting. For the first quarter of 2017 year over year GDP growth in China came in at 6.9 percent versus consensus estimates of 6.6 percent according to data released by Bloomberg. During a time when the country is massively overstocked with excess iron ore, steel and corn inventories, GDP is highlighting a notable divergence between the current economic reality and expected future growth, a positive one at that. 
  • Earlier this quarter, private equity fund flows started to re-enter the energy sector as oil crossed $50 a barrel again. In the first quarter of this year, private equity firms quickly raised 19.8 billion for future energy ventures in attempts to place new bets on the dozens of U.S. shale producers that were hard hit during the downturn over the last couple of years which has resulted in a flurry of bankruptcies, according to Reuters. As the oil market is getting closer to being balanced and prices have climbed out of the slumps, resurgence in the oil and gas industry over the next couple of years is looking promising.

Threats

  • In the first two months of 2017, iron ore and steel prices were surging on the back of strong demand from China; however, the last few weeks has been a challenging period for the two commodities. They have drastically dropped from their highs for the same reasons that bid them up originally, according to Reuters. Positive market sentiment turned negative quickly, as inventories out of China are at record highs displaying that the country is extremely oversupplied with iron ore and steel at ports and mills.
  • Despite the positive news from OPEC members aggressively reducing output, Asia fuel demand continues to falter, according to Reuters. After years of explosive growth and accounting for consuming over a third of global fuel consumption, Asia's largest economies are starting to scale back on fuel demand.  Most notably, Chinese fuel growth is at a three-year low and Japanese fuel demand is down year-over-year according to Matt Stanley, a fuel broker at Freight Investor Services in Dubai. This demonstrates negative crude oil fundamentals in Asia.
  • Over the last few weeks, problems have been hanging over agricultural commodities, ranging from extremely bearish bets from hedge funds to record reports of oversupplied inventory levels. In an article written by Reuters recently, corn is back in the spotlight as it is estimated that China will take three to five years to work through current stockpiles of the agricultural commodity. In attempts to take further measures, the central government of China is encouraging farmers to reduce corn planting and switch to soybeans instead, which is bearish for the agricultural commodity.

The S&P Global Natural Resources Index includes 90 of the largest publicly-traded companies in natural resources and commodities businesses that meet specific investability requirements, offering investors diversified, liquid and investable equity exposure across 3 primary commodity-related sectors: Agribusiness, Energy, and Metals & Mining. The S&P/TSX Composite Diversified Metals & Mining Sub Industry Index is a subset of the constituents of the S&P/TSX Composite Index. S&P Supercomposite Integrated Oil & Gas Sub Industry Index is a capitalization weighted index.

Fund portfolios are actively managed, and holdings may change daily. Holdings are reported as of the most recent quarter-end. Holdings in the Global Resources Fund as a percentage of net assets as of 3/31/2017: Fresnillo plc 0.00%, Rosneft 0.00%.

Net Asset Value
as of 05/23/2017

Global Resources Fund PSPFX $5.39 -0.01 Gold and Precious Metals Fund USERX $7.03 -0.12 World Precious Minerals Fund UNWPX $6.21 -0.08 China Region Fund USCOX $8.83 -0.02 Emerging Europe Fund EUROX $6.41 No Change All American Equity Fund GBTFX $24.08 -0.11 Holmes Macro Trends Fund MEGAX $19.13 0.01 Near-Term Tax Free Fund NEARX $2.23 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change