Commentary Archive 2008

Commentary Archive 2008 background

Commentary Archive 2008

Disclosure

Performance results are based on estimates. Although the information contained in the commentary sections have been obtained from sources we believe to be reliable, the accuracy and completeness of such information and the opinions expressed herein cannot be guaranteed. Past performance is not necessarily indicative of future results. Different types of investments involve varying degrees of risk.

December 2008 Summary

For the year 2008

The Hanseatic Large Cap portfolio underperformed the Russell 1000 Growth benchmark by 2.86% and the S&P 500 Total Return index by 4.30%.

During the fourth quarter of 2008, Hanseatic’s Large Cap product lost 26.34% underperforming the Russell 1000 Growth benchmark by 3.55% and underperforming the S&P 500 Total Return index by 4.40%.

Hanseatic’s Large Cap gained 0.40% during the month of December underperforming the Russell 1000 Growth benchmark by 1.41% and the S&P 500 Total Return index by 0.66%.

For 2008, underPerformance in the Large Cap portfolio derived from two major factors. First was the synchronized selloff in the Energy, Materials and Industrial sectors in August and September; the portfolio was moderately overweight in all three sectors. Second was the intense panic-selling in September through the first half of November, fueled by forced liquidations in mutual funds and hedge funds. In this environment liquidity demands effectively short-circuited the supply-demand equation in the equity markets. By our internal measures, the selling intensity was similar and in some markets greater than the only other period of comparable selling pressure - the terminal stages of the 1929-32 bear market.

Extreme conditions aside, we should have adapted the portfolio into a more defensive sector orientation. Exposure in the Technology, Consumer Discretionary, Industrial and Healthcare sectors penalized Performance the most. Stocks in Telecom, Utility, consumer Staples and Finance sectors performed relatively strong.

November 2008 Summary

Hanseatic’s Large Cap portfolio lost 9.37% during November, underperforming the Russell 1000 Growth benchmark by 1.42% and underperforming the S&P 500 Total Return Index by 2.19%.

Year to Date

The Large Cap has lost 41.62% and lags the Russell 1000 Growth benchmark by 2.09% and trails the S&P 500 Total Return Index by 3.96%.

For the second consecutive month, global equity markets have spiraled lower, discounting unprecedented turmoil in the credit markets and looming recessionary forces. The key structural feature of the markets has been the dislocations caused by mutual fund and hedge fund redemptions and tax-loss selling. The nature of this selling is that it is indiscriminant about the relative value or prospects of individual stocks; the sole objective is to gain liquidity, voluntarily or not.

Large Cap relative underPerformance was due primarily to recent underPerformance in Healthcare stocks, which had been relative leaders and which the portfolio has been moderately overweight. Portfolio stocks in all other sectors outperformed or were in line with the style benchmark.

October 2008 Summary

Hanseatic’s Large Cap portfolio lost 19.14% during October, underperforming the Russell 1000 Growth benchmark by 1.54% and underperforming the S&P 500 Total Return Index by 2.34%.

Year to Date

The Large Cap has lost 35.56% and lags the Russell 1000 Growth benchmark by 1.26% and trails the S&P 500 Total Return Index by 2.72%.

Not a single industry group sector or style benchmark was spared from damage in the devastating October, 2008 decline in the equity markets. Large Cap portfolio underPerformance was due to the poor Performance of individual stocks in Industrials, Healthcare and Technology. Offsetting the steep decline in most stocks were positive monthly results from several biotech, utility and financial stocks.

September 2008 Summary

Year to Date

The Large Cap has lost 20.22% and leads the Russell 1000 Growth benchmark by 0.05% and lags the S&P 500 Total Return Index by 0.93%.

Hanseatic’s Large Cap product lost 18.38% during the third quarter of 2008, underperforming the Russell 1000 Growth benchmark by 6.05%, and underperforming the S&P 500 Total Return Index by 10.01%.

The negative Performance for the Large Cap in the third quarter was due almost entirely to the portfolio’s exposure to Energy, Materials and Industrial stocks. Stocks in theses sectors have been subjected to intense selling pressure as energy and raw materials prices reversed course; the declines in these stocks were likely exacerbated by liquidity/redemption issues for a number of investment funds. Returns for the quarter were negative for all ten market sectors. Selected Healthcare and Finance stocks were the only notable profitable exceptions.

August 2008 Summary

Year to Date

The Large Cap has lost 10.35% and lags the Russell 1000 Growth benchmark by 0.53% and leads the S&P 500 Total Return Index by 1.04%.

Hanseatic’s Large Cap portfolio lost 2.05% during August, underperforming the Russell 1000 Growth benchmark by 3.13% and underperforming the S&P 500 Total Return Index by 3.50%.

UnderPerformance in the Large Cap portfolio was largely attributable to the sharp declines in stocks within the Energy, Materials and Industrial sectors. Selloffs in two stocks that were related to adverse drug trial announcements also undermined Performance. Portfolio stocks in the Consumer Discretionary, Telecommunications, Consumer Staples and Finance sectors were modestly higher.

July 2008 Summary

Year to Date

The Large Cap has lost 8.41% and leads the Russell 1000 Growth benchmark by 2.38% and the S&P 500 Total Return Index by 4.24%.

Hanseatic’s Large Cap portfolio lost 6.30% during July, underperforming the Russell 1000 Growth benchmark by 4.40% and underperforming the S&P 500 Total Return Index by 5.46%.

UnderPerformance in the Large Cap portfolio was largely attributable to the sharp selloff in Energy and Materials stocks. The relative underPerformance was also partially the result of underexposure to financial sector stocks. Positive Performance from Healthcare and selected Technology stocks were a minor offset.

June 2008 Summary

Hanseatic’s Large Cap product gained 7.85% during the second quarter of 2008, outperforming the Russell 1000 Growth benchmark by 6.60%, and outperforming the S&P 500 Total Return Index by 10.58%.

Year to Date

The Large Cap has lost 2.36% and leads the Russell 1000 Growth benchmark by 6.70% and the S&P 500 Total Return Index by 9.55%.

Performance for the Large Cap product was due largely to advances in Energy, Materials and selected Technology, Industrial and Utility sector stocks. Modestly offsetting these gains were losses in stocks from the Consumer Discretionary, Telecom and Consumer Staple sectors. As in the first quarter, relative Performance was helped by being underweight the Banking and Investment Banking groups within the Finance sector.

May 2008 Summary

Hanseatic’s Large Cap product gained 4.81% in the month of May, outperforming the Russell 1000 Growth benchmark by 1.14% and outperforming the S&P 500 Total Return Index by 3.52%.

Year to Date

The Large Cap has gained 1.82% and leads the Russell 1000 Growth benchmark by 3.82% and leads the S&P 500 Total Return index by 5.62%.

Large Cap portfolio Performance was largely attributable to good appreciation in a variety of Technology, Industrial, Energy and Material stocks. Healthcare and Finance stocks in the portfolio had minor net losses for the month.

April 2008 Summary

Hanseatic’s Large Cap product gained 7.22% in the month of April, outperforming the Russell 1000 Growth benchmark by 1.97% and outperforming the S&P 500 Total Return Index by 2.35%.

Year to Date

The Large Cap has lost 2.93% and leads the Russell 1000 Growth benchmark by 2.53% and leads the S&P 500 Total Return index by 2.10%.

Large Cap portfolio Performance was largely attributable to positive results from selected Technology, Energy, Industrial and Healthcare stocks. All sectors contributed to the overall Performance except Consumer Staples, which posted a minor loss.

March 2008 Summary

Hanseatic’s Large Cap product lost 9.50% during the first quarter of 2008, outperforming the Russell 1000 Growth benchmark by 0.68%, and underperforming the S&P 500 Total Return Index by 0.06%.

The mixed Performance for the Large Cap product was due largely to poor Performance in Technology stocks; Consumer Discretionary and Healthcare stocks also hampered Performance. The portfolio was advanced by positive absolute returns in Materials and selected Energy stocks. Relative Performance was helped by being underweight the Banking and Consumer Finance groups within the Finance sector.

February 2008 Summary

Hanseatic’s Large Cap product gained 0.92% in the month of February, outperforming the Russell 1000 Growth benchmark by 2.91% and outperforming the S&P 500 Total Return index by 4.17%.

Year to Date

The Large Cap has lost -8.05% and leads the Russell 1000 Growth benchmark by 1.58% and leads the S&P 500 Total Return index by 1.00%.

In the Large Cap, outPerformance was due largely to overweight positions in the Energy and Material sectors, and selected Telecom, Industrial and Consumer Staples stocks. Performance also benefited from being underweight most of the industry groups within the Financial and Consumer Cyclical sectors. Technology stock exposure penalized portfolio Performance.

January 2008 Summary

Hanseatic’s Large Cap product lost 8.80% in the month of January, underperforming the Russell 1000 Growth benchmark by 1.00% and underperforming the S&P 500 Total Return index by 2.80%.

In the Large Cap, Technology was the clear underperformer in January. The broad market correction impacted almost every Sector with Energy, Health Care and Industrials leading the rest to the downside. Materials were the only positive sector with Selected Gold stocks positively contributing to Performance. An underweight position in Financials also penalized Performance.