Tuesday, January 02, 2007

AA Value Fund Update

I last updated you on the AA Value Fund in early August. Just a reminder that the AA Value Fund is separate from our Model Portfolio. The Fund is a super concentrated portfolio which I will update you on periodically.

The S&P 500 was flat from June to July and began its climb in August. The Fund actually ended August below its July level before mounting a comeback. As I had noted in my last update, the Fund was heavily weighted in the NYSE Group at the time(NYSE: NYX). While we made out OK with that position, we made the mistake of selling it too soon. Had we held on through the end of the year, the Fund's performance would have been stellar. Since August we also took positions in Mueller Water Products (NYSE: MWA) which is also a holding in our Model Portfolio and Harrah's (NYSE: HET) which I wrote about earlier. Mueller at below $14 was too good to pass on and the Harrah's story played as we anticipated with a winning bid of $90 being accepted by the company's Board.

For 2006, the Fund was up 59.7% vs. S&P 500's 13.6% increase. This brings the Fund's CAGR since the beginning of 2003 to 49.3% vs. S&P 500's 13.5% return. I have not made any additional capital contributions to the Fund since 2003.

Our current holdings include Intel (Nasdaq: INTC), Expeditors International of Washington (Nasdaq: EXPD), Leucadia National (NYSE: LUK) and Western Union (NYSE: WU).

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