View Fund Performance
Market Overview
In the third quarter, Columbia Acorn Select outperformed the 19.98% rise in its benchmark, the S&P MidCap 400 Index. For the nine months ended September 30, the fund was up more than the S&P MidCap 400’s gain of 30.14% and more than the large cap S&P 500’s 19.26% return.
Performance attribution1
Breaking down the fund’s performance for the third quarter, we saw several of the companies that penalized our portfolio last year come back with a vengeance. Gains in Sanmina-SCI and Conseco combined made up 6% of the fund’s return in the quarter. Pacific Rubiales Energy added 3% to the fund. Expedia and WNS each added 2%. These same stocks were the primary drivers for the fund’s year-to-date performance as well. There were no stocks that significantly detracted from performance in the quarter.
We purchased six new companies and did not sell out of any stocks during the period. The purchases were Alange Energy, Canacol Energy, ShaMaran Petroleum, Emdeon, Gap and W.W. Grainger. Three of these additions are oil exploration and production companies. We cut back some of the fund’s larger holdings in the petroleum sector during the quarter and added these smaller companies, which we felt could add a lot to their oil reserves through drilling over the next couple of years.
Market Outlook
The market continued to rally in the third quarter, driven by improving company fundamentals, a loosening credit market and some excess liquidity in the financial system. Our barbell approach (undervalued battered stocks on one end and solid franchises with little credit risk on the other) and our stock picking continued to be successful in the third quarter. Despite the continued upswing, we are still concerned about the state of our economy. Last quarter we mentioned that the market could move higher in anticipation of companies showing signs of real growth — growth not just from inventory restocking but also from pass-through sales and price increases. In our meetings with company managements, we see some of this growth occurring, while just last quarter this was not necessarily the case. This tends to be a sign of a recovery getting underway. Our fear, however, is that ongoing aggressive government involvement in private industry will hamper growth in the coming quarters. This could cause unemployment to stay near the 10% level for at least a couple of years. If this does happen, we will likely gravitate toward franchises that can perform well in a sluggish growth environment, thus moving away from the barbell approach.
We also believe that the aggressive money printing that we’ve seen worldwide this past year will flood into some sectors and cause rapid price increases. We expect this to happen in spite of many industries in the world being awash in excess capacity and labor. We don’t believe this bubble will be as broad as the previous bubbles we’ve seen in all commodities, or all technology stocks or the entire housing or financial markets. We see the spike being more narrow and deep, for example, in particular commodities or a specific segment of an industry.
Going forward, we will continue to focus on stock picking while keeping an eye on the macro issues affecting the economy and the markets.
Investment Risk
Risks include stock market fluctuations due to economic and business developments. The fund also has potentially greater price volatility due to the fund’s concentration in a limited number of stocks of mid-size companies. The fund may invest in foreign securities, which may be subject to greater volatility than domestic investments.
Past performance is no guarantee of future results.
Please read and consider the investment objectives, risks, charges and expenses for any fund carefully before investing. For a prospectus, which contains this and other important information about the fund, contact your Columbia Management representative or financial advisor or go to www.columbiamanagement.com.
The Standard & Poor’s (S&P) MidCap 400 Index tracks the performance of 400 mid-cap U.S. companies.
The Standard & Poor’s (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization U.S. stocks. Unlike mutual funds, indices are not managed and do not incur fees or expenses. It is not possible to invest directly in an index.
Unlike mutual funds, indices are not managed and do not incur fees or expenses. It is not possible to invest directly in an index. 1 Determinations of contributors and detractors are based on performance relative to the fund’s benchmark.
Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that the forecasts will come to pass. The views and opinions expressed are those of the portfolio managers and analysts of the affiliated advisors of Columbia Management Group, are subject to change without notice at any time, may not come to pass and may differ from views expressed by other Columbia Management associates or other divisions of Bank of America. These materials are provided for informational purposes only and should not be used or construed as a recommendation of any security or sector.
There is no assurance that any securities discussed herein will remain in an account’s portfolio at the time you receive this report or that securities sold have not been repurchased. It should not be assumed that any securities transaction or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions made in the future will be profitable or will equal the investment performance of the securities discussed herein.
Columbia Management Group, LLC (“Columbia Management”) is the investment management division of Bank of America Corporation. Columbia Management entities furnish investment management services and products for institutional and individual investors. Columbia Funds are distributed by Columbia Management Distributors, Inc., member FINRA and SIPC. Columbia Management Distributors, Inc. is part of Columbia Management and an affiliate of Bank of America Corporation.
Columbia Wanger Asset Management, L.P. (CWAM) is an SEC-registered investment adviser and an indirect, wholly owned subsidiary of Bank of America Corporation. |