See In-Depth Quarterly Overview.

Our Global Opportunities portfolio had an outstanding first half of the year, significantly outperforming its benchmark, the MSCI World index. Additionally, it has outperformed the S&P 500 over one and three years.

During the first four months of the year, we raised our cash position in anticipation of a deterioration in the economic data. We sold a number of positions for gains: ABV, NEE, ORCL, CTXS and BCS. Gains were offset somewhat by sales of some losing positions: UPL, AHT. We did increase one position – AAPL – in February. Biggest winners in the first half were: V, AMGN, KMB, ABT, AAPL, PM, BAM and BIIB. We are increasingly concerned about the rush for dividends which has benefited some of our positions. KMB, MO and PM are fine companies but the current stock prices already reflect that and maybe more.

Our cash position peaked near 30% in April and we have been slowly working that down over the last few months, adding several new positions. Cash now stands at a bit over 18% of the portfolio. Biotechs AMGN and BIIB have been big winners for us and we added a new large cap biotech recently on an earnings disappointment. We also added a large cap technology name, a unique US financial stock and a European software company to the portfolio recently.

Entering the second half we are turning more bullish as the sentiment has turned quite negative (not without reason we might add). Short interest at the NYSE this month exceeded the totals at the low last September, an indication of the degree of negative sentiment. We are still concerned however about the slowing the global economy and the European debt crisis. European stocks appear cheap but the negative trend of the Euro is a headwind. China is slowing, putting pressure on emerging market economies where stocks also appear quite cheap. In the US profit margins may have peaked and slowing export demand will make it a challenge for companies to continue expanding earnings. One wild card is the election which may influence the market heading into the fall. While we are fairly agnostic about politics, the election will likely have a bearing on the outcome of the debate over the fiscal cliff and therefore will influence market direction in coming months.

We are cautious but hopeful about the remainder of the year. The consensus opinion seems to be for all the potential risks to be realized. While we do not know how the European crisis will be resolved, the fate of the Chinese economy or whether the US will re-enter recession, we believe the current negativity may be excessive. The economic data in the US has deteriorated over the first half of the year as we expected but as of now, the data do not support the recession thesis. That may change of course but for now we remain in the slow growth camp. If stocks continue to correct, we are likely to put more of our cash to work.