The largest increase in active weight occurred within the Consumer Discretionary sector, which is now the portfolio’s largest overweight. The increase was primarily a result of adding to existing holdings within the retail industry. We believe this will position the portfolio well as the stock market bottoms, followed by a bottoming out of the economy.
The largest decrease in active weight occurred within the Financial Services sector which is now the portfolio’s second largest overweight. Throughout the quarter, we reduced exposure to diversified financial firms and regional banks by both trimming and eliminating positions. Utilities remains the portfolio’s largest underweight sector. We believe investors have crowded into this expensive, “safe haven” area because of the poor stock market environment and will be unpleasantly surprised by the lack of upside when the overall market turns more positive as it did in the month of March.
The Integrated Oils sector also remains a significant underweight. We have difficulty finding attractively valued companies here, as most are overearning their long term potential by a substantial margin because of the “mini bubble” in energy prices over the past year. We reduced exposure to the Materials & Processing sector by taking partial profits in a grain processing company and eliminating a copper producer. In doing so, the overall sector moved from a market weight to a moderate underweight.