Manager’s Letter 2015 Q1

January 25, 2016

Sargon Y. Zia, CFA

Chief Investment Officer, Portfolio Manager

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In any worthwhile pursuit, one cannot ignore the fundamentals. Proactive investment managers pay close attention to the primary trends affecting market prices. In recent quarters, trends in company earnings have taken a sharp turn.

A “fundamental” driver of the stock market’s longer term trend is the forward looking earnings growth rate. Trailing earnings for the fourth quarter 2014 are in, along with an updated outlook for 2015. Final 2014 operating earnings for the S&P 500 Index grew at 5.3% year over year, well below the 13% estimated at the beginning of that year. Estimates for 2015 forward looking earnings growth were revised to 4.7%, down from 15% estimated in June. Meanwhile, the S&P 500 Index has been marking time since the start of the year.

Sources: S&P Dow Jones Indices,, March 31, 2015. April 8, 2015.
Sources: S&P Dow Jones Indices,, March 31, 2015. April 8, 2015.

In a public presentation in January I stated that my short term expectation is a move to higher highs. But my longer term expectation is more defensive and would depend in part on the quality of attempted rallies and earnings outlook. February brought the higher highs, and I think we might still see more in the short term. The final arbiter is the market and it can change quickly. When it does, so will my opinion, and so will our portfolios.

Warm Regards,
Sargon Zia, CFA
April 9, 2015

Note to reader: Published quarterly, the Manager’s Letter series primarily communicates the author and Chief Investment Officer’s personal opinion on the markets. This article was originally written in October of 2015 and is provided to offer continuity and context for future articles.


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