The second quarter of 2014 was marked by a fair bit of volatility, with the Special Equity portfolio performing well relative to the overall market.  For the second quarter the fund was up by 9.98% while the S&P/TSX increased by 7.75%.

As we highlighted in the second quarter of last year, the selloff in cyclical and small cap growth stocks appear to have had bottomed.  The recovery in small cap growth stocks started last year in the technology and energy sector, and has carried through to material and industrials this year.  Over the last 12 months, the Special Equity Fund is up over 54.1% while the S%P/TSX has returned 28.7%.  The following performance chart shows how the fund has performed versus varies indexes over the last year.



 

June

2nd Quarter

YTD

1 year
JZA Special Equity Fund

+ 9.81%

+ 9.98%

+ 22.91%

+ 54.12%
S&P TSX

+ 2.42%

+ 7.75%

+ 8.63%

+ 28.66%
S&P TSX Small Cap

+ 7.04%

+ 9.36%

+ 18.04%

+ 36.22%
S&P Venture

+ 4.51%

+ 3.40%

+ 10.35%

+ 16.68%

Last quarter, we felt that energy had experienced significant gains, which would be difficult to replicate in second and third quarter.  Although we are not negative for the long term outlook of energy stocks, the stocks needed to consolidate their gains.  As such, the portfolio reduced its overweight in energy stocks to a neutral weight to the index.  The reduction in Energy was redistributed to Materials, where we added both base metals and gold related stocks.  In the past month, material stocks have started outperforming energy stocks, with the material sector up 10% in June while the energy sector had a 5% gain.

Following are the sector weightings of the portfolio relative to its benchmark:

Sector Weightings of Special Equity Portfolio

Special Equity Performance Chart

For the quarter, the top performing sectors were Energy (+9.7%), Industrials (+9%) and Technology (+6.1%).  The 3 worst performing sectors included Health Care (-6.6%), Telecom Services (-0.3%) and Utilities (-0.2%).  In the portfolio, the best performing stocks for the quarter were Panterra Resource Inc., Raise Productions Inc. and Air Canada.  Collectively these three names added 5.08% to the portfolio.  The detractors included Mawson West Ltd., Fission Uranium Corp. and Oncolytics Biotech Inc.  These 3 names subtracted -1.85% from the portfolio.

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