2013 was a stellar year for the stock market. Every major index sans the NASDAQ closed at record prices, while the NASDAQ ended a spectacular year within striking distance of the dot.com bubble highs. Meanwhile, bonds and commodities, particularly gold, struggled tremendously. Arguably we have seen the collapse of the “fear trade” in which financial doomsters were posturing their portfolios for the possibility of a second Great Depression. In our 2013 outlook, our case for a strong stock market was based in our belief that Europe was improving considerably, households were rapidly repairing their balance sheets, real estate was resurgent, energy was getting more abundant and cheaper, and the technology sector was in position for a rally. In the end, our main failing was not pounding the rhetorical table more emphatically on the setup for an epic, rather than merely strong, stock market rally.
2013 was a stellar year for the stock market. Every major index sans the NASDAQ closed at record prices, while the NASDAQ ended a spectacular year within striking distance of the dot.com bubble highs. Meanwhile, bonds and commodities, particularly gold, struggled tremendously. Arguably we have seen the collapse of the “fear trade” in which financial doomsters were posturing their portfolios for the possibility of a second Great Depression. In our 2013 outlook, our case for a strong stock market was based in our belief that Europe was improving considerably, households were rapidly repairing their balance sheets, real estate was resurgent, energy was getting more abundant and cheaper, and the technology sector was in position for a rally. In the end, our main failing was not pounding the rhetorical table more emphatically on the setup for an epic, rather than merely strong, stock market rally.
2013 was a stellar year for the stock market. Every major index sans the NASDAQ closed at record prices, while the NASDAQ ended a spectacular year within striking distance of the dot.com bubble highs. Meanwhile, bonds and commodities, particularly gold, struggled tremendously. Arguably we have seen the collapse of the “fear trade” in which financial doomsters were posturing their portfolios for the possibility of a second Great Depression. In our 2013 outlook, our case for a strong stock market was based in our belief that Europe was improving considerably, households were rapidly repairing their balance sheets, real estate was resurgent, energy was getting more abundant and cheaper, and the technology sector was in position for a rally. In the end, our main failing was not pounding the rhetorical table more emphatically on the setup for an epic, rather than merely strong, stock market rally.
7 8112 9:;2<:#=-> 2013 was a sLellar year for Lhe sLock markeL. Lvery ma[or lndex sans Lhe nASuAC closed aL record prlces, whlle Lhe nASuAC ended a specLacular year wlLhln sLrlklng dlsLance of Lhe doL.com bubble hlghs. Meanwhlle, bonds and commodlLles, parLlcularly gold, sLruggled Lremendously. Arguably we have seen Lhe collapse of Lhe fear Lrade" ln whlch flnanclal doomsLers were posLurlng Lhelr porLfollos for Lhe posslblllLy of a second CreaL uepresslon. ln our 2013 ouLlook, our case for a sLrong sLock markeL was based ln our bellef LhaL Lurope was lmprovlng conslderably, households were rapldly repalrlng Lhelr balance sheeLs, real esLaLe was resurgenL, energy was geLLlng more abundanL and cheaper, and Lhe Lechnology secLor was ln poslLlon for a rally. 1 ln Lhe end, our maln falllng was noL poundlng Lhe rheLorlcal Lable more emphaLlcally on Lhe seLup for an eplc, raLher Lhan merely sLrong, sLock markeL rally. Whlle we dld noL see Lhe economy's LradlLlonal meLrlcs of success reach normallzed" levels ln 2013, lL has been clearly poslLloned for Lhe long awalLed, buL eluslve escape-speed breakouL from Lhe CreaL 8ecesslon. ln many respecLs, Lhe sLock markeL has now surpassed Lhe real economy ln lLs esLlmaLlon of lmprovemenL. 4?+,* .@:. #,:0?.AB ?. ?- C"?., D1--?E0,B :0/1-. D#1E:E0, .@:. %&'( <?00 E, : E,..,# A,:# F1# .@, ,;1*1/A .@:* ?. <?00 E, F1# .@, -.1;2 /:#2,.G Cne reallLy we all musL accepL ls how greaL years ln Lhe sLock markeL Lend Lo borrow from fuLure reLurns, raLher Lhan enhance Lhem. Peadlng lnLo 2013, one could have reasonably expecLed Lo earn an annuallzed reLurn of 6.67 - on par wlLh Lhe markeL's average slnce 1923 - over Lhe course of Lhe nexL
decade. 2 1he S& 300 sLarLed 2013 aL 1426. lacLorlng ln a 6.67 annuallzed reLurn Lhe lndex would be aL 2720 aL Lhe end of Len years. Assumlng LhaL desplLe lasL years' near 30 reLurn, Lhls 2720 Len year S& lndex LargeL does noL change, Lhe expecLed reLurn over Lhe nexL nlne years would be 4.39 annually, lnsLead of 6.67. ln LradlLlonal flnanclal parlance, H1.:0 I,."#* F1# :* ?*+,-.1# J 70D@: K 9,.:. 8eLa ls Lhe reLurn glven by Lhe markeL, whlle Alpha ls Lhe excess reLurn provlded by acLlve managemenL (see our CcLober CommenLary on Cur 'AcLlvely asslve' lnvesLmenL SLraLegy) 3 . When we suggesL LhaL Lhe markeL's expecLed annuallzed reLurn over Lhe nexL Len years should drop, we are alludlng Lo a weaker Lallwlnd from Lhe sLock markeL lLself-8eLa- as a source of reLurns over Lhe nexL nlne years. We by no means vlew 2720 as a flrm LargeL for Lhe markeL down Lhe llne, and we would noL be surprlsed Lo see Lhe markeL ouLperform or underperform Lhe 6.67 long-Lerm average. 8everslon Lo mean (or reverslon Lo Lrend) ls an lmporLanL force ln flnanclal markeLs, Lhough lL ls by no means Lhe only force, nor ls lL Lhe mosL powerful. L@,* <, -"55,-. .@:. A1"# ?*+,-./,*.- /?5@. *1. E,*,F?. F#1/ .@, -:/, .:?0<?*= .@:. @:- @,0D,= .@?- D:-. A,:#B .@,#, :#, .<1 2,A .:2,:<:A-> 'M 5#,:. A,:#- :#, .@, ,N;,D.?1*B *1. .@, *1#/O :*= %M /:#2,.- :#, ,C":00A :- 0?2,0A .1 @:+, : 5#,:. A,:# :- .@,A :#, : E:= 1*,G We led Lhls commenLary wlLh a quoLe from Ceorge Soros LhaL lends lLself nlcely Lo where we Lhlnk Lhe markeLs are aL Lhls polnL ln Llme. rlor Lo 2013, boLh Lhe economy and sLock markeL had been lnconslsLenL, wlLh spuLLerlng" servlng as Lhe mosL descrlpLlve paLh. Whlle lasL year was a greaL Llme Lo be looklng for an lnflecLlon polnL and an escape from Lhe spuLLers, we Lhlnk 2014 wlll be a year for rldlng Lhe Lrend, Lhough Lo whaL exLenL lL wlll flow we can never be sure. 1he preference for conLrarlanlsm ln calllng Lops and boLLoms ls parL of human naLure, however, Lhe vasL ma[orlLy of Lhe Llme, lL ls far more beneflclal Lo follow, Lhan Lo flghL a Lrend. As of Loday, Lhe economy ls movlng fasLer and ln Lhe conLlnued process of acceleraLlon. As we know from newLon's Second Law of MoLlon, Lhe greaLer Lhe mass, Lhe greaLer Lhe force needed Lo change lLs dlrecLlon. When an economy Lhe slze of Lhe u.S. ls acceleraLlng Lo Lhe upslde, lL would Lake an exLremely masslve force Lo flrsL, derall lLs momenLum and second, change lLs course 180 degrees. Whlle such a force ls noL an lmposslblllLy, lL ls exLremely unllkely ln Lhe comlng monLhs.
LeL's examlne some of Lhe more consequenLlal happenlngs ln 2013 LhaL wlll seL Lhe sLage for 2014: H@, P#,=?. Q*+?#1*/,*.> We have long emphaslzed LhaL Lhe CreaL 8ecesslon ls an ouLgrowLh of Lhe de-leverlng (l.e. debL repaymenL) of Lhe u.S. economy ln aggregaLe. 1hls becomes clear when we look aL LoLal credlL as a percenL of Cu.
8ay uallo of 8rldgewaLer AssoclaLes has called Lhls a beauLlful de-leveraglng" for how smooLhly Lhe u.S. has comblned ausLerlLy (a reducLlon ln a secLor's annual deflclL as a share of Cu), debL resLrucLurlng (Lhe reflnanclng of exlsLlng debLs Lo longer maLurlLles and lower lnLeresL raLes) and Lhe prlnLlng of money (aggresslve moneLary pollcy). 4
WlLhln Lhls broader conLexL, lL's lmporLanL Lo look aL each of Lhe lndlvldual prlvaLe secLor componenLs. Pousehold balance sheeLs sLopped decllnlng and ln aggregaLe, essenLlally flaL-llned. When household credlL nelLher grows nor conLracLs, buL Cu does ln facL grow, Lhen household credlL as a share of Cu
decllnes. 1hls ls subLle and lmporLanL when looked aL ln Lerms of Lhe gross levels, buL clear as seen relaLlve Lo Cu. More vlolenL conLracLlons ln household credlL would come alongslde equally more vlolenL flssures ln our flnanclal markeL. As such, Lhe subLleLy lLself ls a core componenL of Lhe beauLlful" naLure of our deleveraglng. 1he followlng charL shows each of Lhe key prlvaLe secLor componenLs as a share of Cu:
lmporLanLly, Lhe non-flnanclal corporaLe secLor (Lhe green llne) ls movlng upward/leverlng up for Lhe flrsL Llme ln years, and lL ls Lhe only secLor Lo do so. We have argued for some Llme Lhls ls Lhe prlvaLe secLor arena wlLh Lhe greaLesL capaclLy for expanslon ln borrowlng. Companles have been well caplLallzed for a whlle now, bulldlng up masslve sLockplles of cash due Lo a lack of good lnvesLmenL opporLunlLles. lor now, much of Lhls new debL has been used for repurchases of Lhe exlsLlng equlLy sLock. Whlle Lhls ls less beneflclal Lhan ouLrlghL new lnvesLmenL, we Lhlnk Lhe re-leverlng of Lhe corporaLe secLor has afforded capaclLy for boLh households and our governmenL (whlch ls noL lncluded ln Lhls prlvaLe secLor snapshoL) Lo accompllsh Lhelr own deleveraglng wlLhouL leadlng Lo more pressure on Lhe broader economy. ln our SepLember 2012 CommenLary, we hlghllghLed Lwo companles we
lnvesLed ln who Look on greaLer leverage ln order Lo smarLly allocaLe Lhe proceeds. 3 Cne company opLed for share repurchases, whlle Lhe oLher made an aggresslve acqulslLlon. 8oLh lncreased Lhelr leverage and boLh saw Lhelr sLocks appreclaLe aL a fasLer cllp Lhan Lhe markeL ln 2013. 1he normallzaLlon of credlL spreads over Lhe pasL year has been one facLor Lo help Lhe corporaLe secLor Lake on new borrowlngs. lL also provldes a nlce snapshoL for [usL how far Lhe economy has moved Lowards normallzaLlon slnce Lhe dawn of Lhe CreaL 8ecesslon.
R?-;:0 S,:=<?*=- T1 U1#,> uurlng Lhe depLhs of Lhe CreaL 8ecesslon, whlle Lhe headllne presses focused on Lhe u.S. lederal CovernmenL's lncreaslng deflclL, Lhere was a rapld conLracLlon ln expendlLures on Lhe sLaLe and local level. Whlle sLaLe and local governmenLs also ran deflclLs durlng Lhls perlod, Lhey were due excluslvely
Lo shorLfalls ln revenue lnsLead of growLh ln expendlLures. SLaLe and local governmenLs were parLlcularly aL rlsk wlLh Lhe rapldly decllnlng real esLaLe markeL and employmenL slLuaLlon. As a resulL of consLlLuLlonal resLrlcLlons mandaLlng balanced budgeLs ln Lhese locallLles, sLaLe and local governmenLs drasLlcally cuL spendlng ln order Lo maLch Lhelr shrlnklng revenue base. 1hls placed an lmmense burden on Lhe economy. WlLh Lhe real esLaLe markeL's recovery and Lhe employmenL slLuaLlon flnally sLarLlng Lo lmprove, sLaLe and local governmenL budgeLs have qulckly escaped deflclL LerrlLory. ln aggregaLe, Lhere ls now a surplus. WlLh a growlng economy, Lhere ls ample room for expendlLures on Lhls level of governmenL Lo rlse aL leasL as qulckly as Cu grows. WhaL had been a headwlnd for Lhe pasL flve years now should Lurn lnLo a Lrue Lallwlnd:
LasL year was also one of Lhe blggesL conLracLlons ln Lhe lederal deflclL as a share of Cu ln recenL hlsLory. Some esLlmaLe Lhe flscal drag"-Lhe headwlnd provlded by a conLracLlon ln Lhe governmenL's deflclL as a share of Cu-was as hlgh as 2.4 of Cu. 6 1hls alone ls more Lhan our averaged annuallzed growLh slnce escaplng Lhe CreaL 8ecesslon. Conslderlng 2013 was a poslLlve year for Cu growLh overall, lL goes Lo show [usL how sLrongly Lhe prlvaLe economy ls performlng rlghL now.
Q/D01A/,*. ?- .@, V,A :*= ?. ?- )/D#1+?*5> lmporLanLly, people who have Lhelr [obs have been ln a much more sLable poslLlon Lhan any Llme ln Lhe recenL pasL. 1hls serves several crlLlcal roles lncludlng offerlng a much-needed boosL Lo consumer confldence ln order Lo enable spendlng, and affordlng workers Lhe opporLunlLy Lo seek ouL more aLLracLlve opLlons wlLhouL as much worry. Workplace moblllLy ls an lmporLanL facLor ln helplng workers seek ouL hlgher pay, career advancemenL and enLrepreneurlallsm.
As of Loday, we see slgns of an lmprovlng wage envlronmenL for Lhe flrsL Llme slnce 2006. Pourly wages have flnally sLarLed movlng upward from Lrough levels and Lhls ls a Lrend whlch we look Lo conLlnue and acceleraLe Lhrough 2014. Should LhaL be Lhe case, lL would seL Lhe sLage for a much healLhler populace and economy. We wlll be waLchlng Lhls charL closely Lo conflrm our susplclons LhaL such a Lrend ls afooL:
L@:. =1 <, 1<*W 1hls year we lnLroduced a quarLerly revlew LhaL Lakes a look aL our Lhree besL and worsL performers durlng Lhe covered Llme perlod. Slnce Lhls ls our year-end reporL, Lhls edlLlon of WhaL do we own?" wlll focus on our Lhree besL and worsL performers for Lhe year, wlLh a LwlsL: we wlll focus only on Lhose flrms LhaL we sLlll own Loday and noL poslLlons LhaL have been exlLed durlng Lhe year. WlLh companles purchased ln Lhe calendar year, we wlll focus only on performance from Lhe daLe aL whlch we commenced our poslLlon. Cur prlmary goal ln lnLroduclng Lhls secLlon has been Lo help share wlLh you Lhe source of our lnLeresL ln our porLfollo companles-boLh Lhe good ones and Lhe bad-and noL as an expllclL means Lo hlghllghL performance. Conslderlng our low Lurnover, wrlLlng abouL new poslLlons would ofLen leave us wlLhouL any companles Lo commenL on. As a resulL, leaders and laggards provlde a naLural sLarLlng polnL for Lhls conversaLlon abouL whaL we own. 1hls was a very speclal year, for none of our Lhree ;1#, ,C"?.A D1-?.?1*- ln 1he Laggards" acLually wenL down for Lhe year and/or from Lhe polnL of our purchase (we do own bonds ln some accounLs and Lhese dld experlence losses durlng Lhe year, Lhough Lhey were modesL ln each poslLlon and lmmaLerlal on Lhe porLfollo level). 8aLher Lhan an accompllshmenL, Lhls ls purely a sLroke of luck-a sLroke of luck whlch we would welcome Llme and agaln. !"# %#&'#()* QN1# 6D7 X9)H> QY!M KZZG([\ Lxor ls an lLallan-based holdlng company, servlng as Lhe lnvesLmenL vehlcle for Lhe Agnelll lamlly-Lhe foundlng famlly of llaL. llaL lLself was an excepLlonal drlver of reLurns aL Lhe parenL company, wlLh lLs own lmpresslve 66.33 reLurn on Lhe year, Lhough lL was hardly Lhe only caLalysL for our shares of Lxor. Cur poslLlon commenced as a sLake ln Lhe referred shares, however, ln Lhe flrsL quarLer, Lxor underLook an lnlLlaLlve Lo sLreamllne Lhe caplLal sLrucLure and merge Lhe preferred sLock lnLo Lhe common. 7 Slnce Lhe preferred were Lradlng aL a dlscounL Lo Lhe common, Lhls sparked conslderable upslde for our sLake. lurLher aldlng shares were Lhe merger of llaL lndusLrlal (formerly parL of llaL lLself) lnLo CnP and Lhe successful sale of Lxor's sLake ln Lhe Swlss-based SCS. 8
9 We were flrsL aLLracLed Lo Lxor because of our lnLeresL ln llaL, Lxor's conslderable dlscounL Lo neL AsseL value, and lLs sharp
managemenL Leam behlnd a well-rounded porLfollo. All facLors conLlnue Lo remaln aLLracLlve lnLo Lhe new ?ear, desplLe Lhe sLrong run-up ln shares. P#,,B )*;G XT76]7^> PIQQM K ZZG['\ Shares of Cree were a flrsL quarLer Leader" and Lhlrd quarLer Laggard" ln our porLfollos, Lhough Lhe year lLself was Lruly a breakouL. As of 2014, consumers can no longer purchase 40- and 60-waLL lncandescenL llghL bulbs. 10 noLlce LhaL Lhls ban dld noL enLer effecL unLll 2014, yeL Cree had a banner year ln 2013. Cbvlously Lhe look-ahead Lo 2014 helped shape lnvesLor expecLaLlons abouL Lhe sLock, buL mosL lmporLanLly, Lhe fundamenLals aL Cree Look a huge sLep forward ahead of schedule. Cree's accompllshmenLs are greaLesL on Lwo fronLs: Lhey have by far Lhe hlghesL quallLy of llghL-bulb and Lhey are able Lo offer Lhls quallLy aL an exLremely compeLlLlve prlce, sans subsldy. 11 WlLh Lhe lnLroducLlon of an Ldlson-sLyled llghL bulb aL Pome uepoL, Cree was able Lo quell concerns LhaL Lhe lncandescenL llghL bulb ban would resulL ln a marked decllne ln Lhe quallLy of lndoor llghLlng around u.S. households and buslness. 12 lnnovaLlon dellvered qulcker Lhan any expecLed ln Lhls case, and Lo LhaL end, Cree's sLock conslderably ouLperformed our expecLaLlons. Cree enLers 2014 ln greaL flnanclal shape, Lhough aL a modesLly expenslve valuaLlon. uesplLe LhaL, we Lhlnk Lhe growLh Lra[ecLory for Lhe company remalns exLremely favorable. H@, T,< _1#2 H?/,- P1/D:*A XT_6Q> T_HM KZ&G&&\ We commenced our poslLlon ln Lhe n? 1lmes on !anuary 31, 2013. We vlewed Lhe 1lmes as a sum of Lhe parLs slLuaLlon lnvolvlng Lhree parLs: 1) a valuable ManhaLLan skyscraper, 2) a run-off prlnL newspaper buslness, and, 3) a venLure caplLal-Lype lnLerneL sLarLup. When Lhe 1lmes was ln dlsLress durlng Lhe CreaL 8ecesslon, Lhey sold an lnLeresL ln Lhe n? 1lmes bulldlng Lhrough a flnance lease. 1hls afforded Lhe opporLunlLy for Lhe company Lo repurchase Lhls valuable properLy flfLeen years from Lhe daLe of Lhe sale. 13 As new ?ork real esLaLe breaks ouL slgnlflcanLly from Lhe Lrough days of Lhe CreaL 8ecesslon, Lhe value of Lhls repurchase opLlon ls levered Lo n? real esLaLe prlces and lncreaslng accordlngly. 1he markeL conLlnues Lo under-appreclaLe Lhls source of hldden value. Moreover, wlLh a spaLe of aggresslvely valued medla-based lCs, premlsed on Lhe poLenLlal for growLh, we felL Lhe n? 1lmes onllne plaLform- lLself on Lhe recelvlng end of mllllons of global eyeballs-had Lhe undersLaLed capaclLy Lo enhance
moneLlzaLlon. 1he 1lmes conLlnues Lo lnnovaLe ln dlglLal dlsplay, wlLh feaLures llke +,-./&00, and Lhe paywall conLlnues Lo exceed all expecLaLlons, whlle seLLlng Lhe bar for lLs peers. 14
!"# %&11&(')* 7/,#?;: U1+?0 XT_6Q> 7UYM K`G%\ We purchased Amerlca Movll on !uly 1, 2013 and slnce Lhen Lhe sLock has exhlblLed llLLle movemenL. We spenL much of Lhe early summer looklng for bargalns ln Lmerglng MarkeLs as fears escalaLed over whaL Lhe lederal 8eserve 8ank's Laperlng" would mean for LMs and wheLher Chlna would be able Lo execuLe a sofL landlng." Amerlca Movll flL several quallLles LhaL we flnd exLremely aLLracLlve: lL has one of Lhe besL caplLal allocaLors (Carlos Sllm) as an owner-operaLor buylng more shares wlLh hls own cash, Lhe company ls repurchaslng shares aL a furlous pace (over 7 of shares ouLsLandlng ln 2013), and lL operaLes ln a recurrlng revenue buslness LhaL ls one of Lhe lasL expenses any lndlvldual would cuL even ln Lhe worsL economlc Llmes. 13 SenLlmenL ls exLremely low on Lhls sLock rlghL now due Lo Lhe uncerLalnLy of Lhe Mexlcan Lelecom regulaLory reglme and Lhe aforemenLloned concerns relaLed Lo LMs. We vlew Lhls confluence of rlsk facLors Lo be far more superflclal Lhan fundamenLal Lo Lhe buslness, and Lhlnk Amerlca Movll ls ln a greaL poslLlon Lo be a sLeady compounder over Llme. 2014 should be beLLer Lhan 2013 here. H,+: a@:#/:;,".?;:0 )*="-.#?,- XT_6Q> HQb7M K`G`(\ 1eva was a member of Lhe Laggards" secLlon ln Lhe Lhlrd quarLer, and obvlously dlsappolnLed us conslderably on Lhe year. 1he pharmaceuLlcal and bloLechnology secLors en[oyed a blockbusLer 2013, whlle 1eva langulshed ln dark. Mr. MarkeL conLlnues Lo look wlLh scorn upon Lhe lmpendlng paLenL explraLlon of Copaxone and ln so dolng, conLlnues Lo lgnore Lhe valuable generlcs buslness. ln our Lhlrd CuarLer noLe, we heaped pralse upon ur. !eremy Levln as CLC, Lhough ln a surprlslng move, 1eva and ur. Levln declded Lo parL ways. 16 ln llghL of ur. Levln's deparLure, we spenL conslderable Llme revlslLlng our analysls on Lhe company and remaln convlnced Lhe value ls exLremely aLLracLlve. An lsraell acLlvlsL lnvesLor, 8enny Landa, has sLepped up Lo provlde an lmporLanL advocaLe for shareholders and looks Lo close Lo securlng a well-regarded Lurnaround speclallsL" ln Lrez vlgodman as Lhe new CLC. 17
would be exacLly Lhe Lype of caLalysL Lhls sLock needs ln order Lo geL Wall SLreeL's shorL-Lerm aLLenLlon span focused on Lhe fuLure raLher Lhan Lhe recenL pasL and Lhe nexL flfLeen mlnuLes. P?-;1 6A-.,/- XT_6Q> P6P!M K'cG[%\ Clsco had a dlsappolnLlng 2013 on all levels. 1he sLock had been performlng falrly well unLll a huge warnlng on revenues ln Lhe november earnlngs release-beLween 8 and 10 sequenLlally. 19 uesplLe Lhls omlnous warnlng, Clsco sLock remalns very cheap. Powever, as Llme marches on, our confldence has sLarLed Lo waver ln !ohn Chambers' leadershlp as Lhe company remalns overcaplLallzed, conLlnues Lo repurchase shares, and yeL lLs share counL falls Lo maLerlally shrlnk. 1here ls slmply no excuse for Lhe company's lacklusLer efforL Lo follow l8M's LemplaLe of smarL caplLal allocaLlon ln Lechnology. lrom our seaL, lL seems as Lhough Chambers ls more wllllng Lo use hls excess cash poslLlon Lo LrumpeL pollLlcal Lalklng polnLs (abouL hls deslre for a Lax hollday on repaLrlaLlon of forelgn earnlngs) Lhan he does for shareholder value. 1he reallLy ls LhaL Lhe company would be a conslderably more valuable and respecLed by Lhe sLock markeL had Chambers slmply pald Laxes Lo repaLrlaLe all of lLs cash and repurchased shares ln a Lender Lhan engaglng ln publlc advocacy. 1haL belng sald, we conLlnue Lo vlew Clsco as a greaL value wlLh a subsLanLlal margln of safeLy, Lhough should we noL see furLher progress on caplLal allocaLlon we mlghL slmply leave Lhls lnvesLmenL for greener pasLures ln Lhe comlng monLhs. Cnly Llme wlll Lell whaL Lhls llsL wlll look llke nexL year aL Lhls Llme.
1hank you for your LrusL and confldence, and for selecLlng us Lo be your advlsor of cholce. We wlsh you and your famllles a healLhy, happy, and prosperous 2014. lease call us dlrecLly Lo dlscuss Lhls commenLary ln more deLall - we are always happy Lo address any speclflc quesLlons you may have. ?ou can reach !ason or LllloL dlrecLly aL 316-663-7800. AlLernaLlvely, we've lncluded our dlrecL dlal numbers wlLh our names, below. Warm personal regards,
Past performance is not necessarily indicative of future results. The views expressed above are those of RGA Investment Advisors LLC (RGA). These views are subject to change at any time based on market and other conditions, and RGA disclaims any responsibility to update such views. Past performance is no guarantee of future results. No forecasts can be guaranteed. These views may not be relied upon as investment advice. The investment process may change over time. The characteristics set forth above are intended as a general illustration of some of the criteria the team considers in selecting securities for the portfolio. Not all investments meet such criteria. In the event that a recommendation for the purchase or sale of any security is presented herein, RGA shall furnish to any person upon request a tabular presentation of: (i) The total number of shares or other units of the security held by RGA or its investment adviser representatives for its own account or for the account of officers, directors, trustees, partners or affiliates of RGA or for discretionary accounts of RGA or its investment adviser representatives, as maintained for clients. (ii) The price or price range at which the securities listed in item (i) were purchased. (iii) The date or range of dates during which the securities listed in response to item (i) were purchased.