3.31.14: How our Top 5 Holdings Performed in q1 ’14

We took in about $300k in new money in q1 ’14. Thank you to both long-time and new clients for your trust and confidence.

Our Top 5 equity positions performed pretty well in q1 ’14. Although we don’t download index data until the 8th or 9th of April, q1 ’14 should be a continuation of the decent relative and absolute performance we generated for clients in 2013.

Here are out Top 5 equity holdings as of 3/31/14, and their quarterly return per our technical software: (the quarterly return doesn’t include the dividend):

4.29% MSFT +11% in q1 ’14 (MSFT’s April ’14 earnings report will be key. The stock has moved on Ballmer leaving. Now we need growth.)

3.43% SCHW +6% in q1 ’14 (we still like Chuck, as retail returns to the equity market)

3.29% Facebook +9% in q1 ’14, the gain was far bigger a month ago. (The growth-to-value theme has taken steam out of FB);

3.23% Alcoa (AA) +20% return in q1 ’14. Monster move as commodities and growth-to-value rotation has helped stock. We’ve owned Alcoa forever, since the ’09 bottom. Painful until now.

2.89% JP Morgan +4.5% in q1 ’14. The big banks are now like utilities. They have to come to the Fed for dividend and stock repo “permission”. That is ugly or socialism, depending on how you look at it.

Our worst trade so far in q1 ’14 was the TBF, which is 3.82% of client accounts, mainly balanced accounts and it fell 7.8% in q1 ’14.

Our all-equity accounts should look better than our balanced accounts given the TBF drag. The curve-flattening trade in q1 ’14 didn’t help at all.

One astute reader of our earnings work noted the “6%” SP 500 earnings growth number this weekend, while I later used 8% in reference to 2013’s return. The difference is the JP Morgan litigation charge taken in q3 ’13 by the big bank. When using operating EPS for the SP 500 just that one charge cost the SP 500 dearly, given JPM’s size in the SP 500. When using the SP 500 EPS growth numbers for 2013, (the simple math) 6% is the growth in EPS, including the JPM litigation charge, 8% if we exclude JPM.

The above holdings and positions can change at any time.

We will continue with our “growth and value” style for clients. q1 ’14 is a perfect example of how the two styles can complement each other. We expect yield curve steepening in q1 ’14, particularly if the Friday’s job number is strong.

Thanks for reading. We are planning for choppy but flat markets overall for the next 2 quarters of 2014. The 2-year Presidential Cycle is a good analog for the year, but let’s see how q1 ’14 earnings look.

Trinity Asset Management, Inc. by:

Brian Gilmartin, CFA

Portfolio manager

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