Holmes Growth Fund
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July 2010

The Holmes Growth Fund underperformed its benchmark, the S&P Composite 1500 Index, in July.

Strengths
  • The fund was overweight the energy sector which outperformed.  Individual names in energy sector holding which contributed to performance included Brigham Exploration Co, Concho Resources Inc, and Newfield Exploration Co.
  • Strength in individual stock selections such as Newfoundland Capital Corp Ltd, Riverbed Technology Inc, Steven Madden Ltd, and Baidu Inc contributed positively to fund performance.  
  • The fund was overweight the consumer discretion sector which outperformed.
Weaknesses
  • Although the fund was overweight the materials sector which was the best performing sector, the fund’s holdings in that sector were weighted toward gold stocks, which underperformed.
  • The fund was underweight the industrials and telecom services sectors, the second- and third-best-performing sectors.
  • Weakness in individual stocks such as African Medical Investments, Randgold Resources Ltd, and Express Scripts Inc detracted from fund performance.
Opportunities
  • The cyclical recovery now underway in the global economy should provide an opportunity for corporate earnings gains, thereby providing a positive fundamental background for stocks.
  • Corporate cash levels are high, providing corporations the ability to pursue mergers and acquisitions (M&A). An increase in M&A activity holds promise for both portfolio gains and for an increase in overall market valuations.
Threats
  • Expectations for a continuing recovery in the economy are present, and if recovery does not materialize in line or ahead of expectations, it could be negative for stocks.
  • As governments around the world begin to wind-down the monetary and fiscal stimulus programs put in place during the economic crisis, it will likely present a headwind for stocks.

Past performance does not guarantee future results.

The S&P 1500 Composite is a broad-based capitalization-weighted index of 1500 U.S. companies and is comprised of the S&P 400, S&P 500, and the S&P 600.  The index was developed with a base value of 100 as of December 30, 1994.  Holdings in the Holmes Growth Fund as a percentage of net assets as of 6/30/10: Brigham Exploration Co. 1.53%, Concho Resources Inc. 2.59%, Newfield Exploration Co. 1.29%, Newfoundland Capital Corp Ltd. 7.87%, Riverbed Technology Inc. 1.62%, Steven Madden Ltd. 1.82%, Baidu Inc. 1.99%, African Medical Investments 1.04%, Randgold Resources Ltd. 3.32%, Express Scripts Inc. 2.75%.


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