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Second Quarter 2014

Strengths

  • The Global Resources Fund ended the second quarter of the year higher with a 9.63 percent return. See complete fund performance here.
  • Natural gas and WTI crude oil advanced for a second-consecutive quarter.  Moreover, the oil- and gas-related equities within the fund’s portfolio outperformed its benchmark, the Morgan Stanley Commodity Related Equity Index (CRX), due in part to robust oil shale exposure. Goodrich Petroleum, Sanchez Energy and Anadarko Petroleum were key contributors to performance.
  • An underweight position in food stocks per our allocation model proved accretive to fund performance in the quarter. Benchmark constituents Tyson Foods and Conagra Foods were down 15 and 4 percent, respectively, in the quarter.
  • Prices for industrial metals rallied on the London Metals Exchange in the quarter.  Additionally, the fund’s holdings within base metals outperformed. Alcoa and Sherritt International both gained an average of 15 percent.
  • Despite an underweight position for most of the quarter, the fund’s precious metals portfolio outperformed, as the price of gold gained 3 percent in the April to June period.  Mandalay Resources and Gran Colombia Gold gained 25 and 21 percent, respectively, in the quarter.

Weaknesses

  • Despite gaining nearly 10 percent in the quarter, the fund slightly underperformed its benchmark by 59 basis points.
  • The market’s preference for large-capitalization resource stocks weighed on returns in the quarter, particularly for equities listed on the London AIM Exchange. Africa Oilfield Logistics, Sable Mining and Agriterra accounted for 149 basis points of negative performance relative to the CRX benchmark.
  • Clean/renewable energy equities underperformed the benchmark in the quarter, partially due to volatile performance for growth and technology stocks.  JinkoSolar Holdings, Canadian Solar and Trina Solar posted negative returns.
  • An allocation to transportation equities, relating to the shipping of iron ore and crude oil, negatively impacted fund performance. Star Bulk Carriers Corp. and Tsakos Energy Navigation Ltd were both notable laggards.

Opportunities

  • The International Energy Agency (IEA) reported that global oil demand will rise at the fastest pace in five years, climbing 1.5 percent to a record 94.1 million barrels a day in 2015. The dramatic increase points to growth in China and other emerging markets.
  • Through recent press releases, the Indonesian Economic Minister, Chairul Tanjung, has implied that an agreement has been reached between the government and Freeport-McMoRan. The ongoing export disputes over concentrates at Grasberg, which have dropped Freeport’s main asset production to roughly 40 percent of its nominal capacity over the last two quarters, may soon be at an end.
  • Codelco, a Chilean mining company, is likely to cancel shipments of around 10,000 tonnes of refined copper due to problems in its new Ministro Hales mine. Totaling roughly 3 percent of its 2014 contracted term shipments to China, the cancelled orders will likely lead Chinese importers to purchase spot-refined copper on international markets.  The result would be supportive for copper prices, which have already risen more than 10 percent since March. 

Threats

  • Non-commercial speculative positions in the oil futures market now stand near the highest level on record.  If this unwinds abruptly it could materially weaken oil prices in the near term.
  • News of increased supply coming out of Libya and new pipelines in the U.S. has created a negative forecast on oil prices through the rest of the year. Futures weakened as a result of this news.
  • Old and decrepit highways in southern Texas and North Dakota are hindering thousands of 18-wheeler trucks. The crumbling roads threaten billions of dollars of investment in oil production in the U.S.

Past performance does not guarantee future results.

The Morgan Stanley Commodity Related Index (CRX) is an equal-dollar weighted index of 20 stocks involved in commodity related industries such as energy, non-ferrous metals, agriculture, and forest products. The index was developed with a base value of 200 as of March 15, 1996. The London Metal Exchange (LME) is the futures exchange with the world's largest market in options, and futures contracts on base and other metals. The Financial Times-Stock Exchange (FTSE) AIM (Alternative Investment Market) All Share Index is a capitalization-weighted index of emerging and smaller companies traded on the London Stock Exchange.

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 06/30/2014: Africa Oilfield Logistics Ltd 2.27%, Agriterra Ltd 0.51%, Alcoa Inc. 2.42%, Anadarko Petroleum Corp. 2.66%, Canadian Solar 0.00%, Codelco 0.00%, Conagra Foods 0.00%, Freeport-McMoRan Copper & Gold Inc. 0.13%, Goodrich Petroleum Corp. 1.46%, Gran Colombia Gold Corp. 3.20%, JinkoSolar Holdings 0.00%, Mandalay Resources Corp. 0.99%, Sable Mining Africa Ltd 0.83%, Sanchez Energy Corp. 1.93%, Sherritt International Corp. 1.48%, Star Bulk Carriers Corp. 0.00%, Trina Solar 0.00%, Tsakos Energy Navigation Ltd 0.00%, Tyson Foods 0.00%.

Net Asset Value
as of 07/25/2014

Global Resources Fund PSPFX $10.24 -0.01 Gold and Precious Metals Fund USERX $7.70 0.16 World Precious Minerals Fund UNWPX $7.27 0.13 China Region Fund USCOX $8.32 0.03 Emerging Europe Fund EUROX $8.36 0.02 All American Equity Fund GBTFX $33.24 -0.03 Holmes Macro Trends Fund MEGAX $24.05 -0.13 Near-Term Tax Free Fund NEARX $2.26 No Change U.S. Government Securities Ultra-Short Bond Fund UGSDX $2.00 No Change