Peattie Capital Management :: Invested in the Individual

PCM Newsletter Archives

2014 ISSUES

December 4, 2014

Range of Returns	November	YTD

All PCM Accounts	0.3% - 3.7%	6.9% - 18.0%
S&P 500	2.4%	11.9%

Back on track after October's selloff

In November the markets and Peattie Capital's accounts registered solid gains. Once again, large-caps were the best performers, and portfolios that hold a preponderance of them were the best performers among Peattie Capital portfolios. Most portfolios returned about 2% for the month, and for the year, most portfolos have returned low double digits, net of fees.

It's worth mentioning that small-caps are barely positive for the year (+0.8%) and many Peattie Capital portfolios are small-cap oriented. I am delighted that portfolios have performed so well in the face of this divergence, which, according to Morgan Stanley's Adam Parker, is the most that small-caps have lagged large-caps in 15 years.

December is usually strong, but expect volatility in the beginning

Peattie Capital is far more concerned with individual stock and industry fundamentals than the calendar, but when seasonal patterns are this strong it's worthwhile to pay attention. For example:

Both the Dow Jones and S&P 500 have averaged 1.7% gains in December since 1950, making December the best month of the year (Source: Jeff Hirsch Editor-in-Chief at the Stock Trader's Almanac). However the second half of the month tends to be better which is probably a result of tax-loss selling in the first half and year-end positioning. Mid-term Decembers tend to be a little weaker than the norm.

December is also noteworthy for the "Santa Claus" rally which begins Christmas Eve, and lasts through the second trading day of the new year. During this period the average gain for the S&P 500 since 1969 is 1.5% (Source: Ibid). Perhaps more importantly, this period is the first indicator of what may be in store for 2015. According to Hirsch, the last four times the Santa Claus rally didn't happen the following year was flat twice (1994 and 2004) and very poor twice (2000 and 2008).

While Peattie Capital has many big winners this year, there are a couple core holdings that are down. I will be looking to add to them if they trade down on tax-loss selling, and I hope they do.

Oil crash is deflationary

The 38% drop in oil will benefit consumers and others such as airlines and cruise lines. The drop is supply driven; that is, it doesn't stem from a drop in demand, which is important for several reasons. First, suppliers can (and eventually will) respond to the price drop by cutting production. Second, with long-term global demand still in place, at some point the pendulum will swing back again the other way, and the energy industry will be very profitable. How long either of those takes is unknowable for now. It's interesting to me that the futures' price for oil in 2019 remains just below $90, exactly where it was a year ago.

Peattie Capital income accounts own several energy related Master Limited Partnerships ("MLPs"), which have been highly successful investments over the past few years. Among MLPs, they are somewhat conservative, depending on volume and throughput rather than the price of the underlying asset. So to some degree they are protected, although in the near term they will trade along with the price of oil.

Lower oil prices are deflationary and will likely help keep long-term interest rates lower for longer. Inflation? What inflation? The 10-year note in the U.S. is roughly 2.25%, and, while I'm not in the business of predicting interest rates, my guess would be that the 10-year will touch 2% before it touches 3%.

Think it's been a while since we had a 10% correction? You're right

One of the more noteworthy items I read in November was from Jon Strebler, a columnist at Richard Russell's Dow Theory Letters. Russell has been writing daily about the markets for over 50 years, and now, age 90, he has added a few colleagues to lighten his load. Everyone knows the markets have been very strong, but nonetheless it surprised me to read what Strebler wrote on November 25: "I was looking over our daily chart books that go back to 1885, and didn't see another example of the market rising for 3 full years without a correction of 10%."

Outlook for 2015

2015 looks to me to have the ingredients for another good year, but there is no doubt that markets, broadly speaking, aren't as attractively priced as they have been. A recent Barron's article stated that markets were now valued at 120% of GDP (John Kimelman November 20), and I am mildly concerned about the surprisingly rapid appreciation of the U.S. dollar, as a number of core holdings have global operations. Sealed Air ("SEE") comes to mind. Currency risk is very real when things happen so quickly and is difficult for even the best managers.

In addition, sentiment has gotten exceptionally high again, as has happened several times in 2014, and is near levels that have coincided with short-term market tops in the past. This may not be an issue for the balance of 2014, as so many portfolio managers have underperformed and will be buying any dip. According to John Authers in the December 4 Financial Times, "equity long-short hedge funds, whose performance is all about stock picking, have managed to return 1%".

Nonetheless, 2-3% GDP growth, a strong currency, rock-bottom interest rates, abundant merger activity, lack of alternative investments, increasing bank lending, and low/falling oil prices are all favorable factors. At some point the Fed will move on short-term rates, but with the rest of the world struggling, my guess is that is further away than is generally believed. Besides, "the S&P 500 peaks on average 29 months after the first Fed rate hike" according to a presentation by Leon Cooperman at the September 8 Value Investing Congress in New York.

A few portfolio comments

Many portfolios own Kohlberg, Kravis, Roberts ("KKR"), which I recommended in March 2013. While I still like the income it provides, I have concluded that assets are just too expensive and that future returns will be harder to generate. As such, I have begun selling the KKR position in most portfolios.

Royal Caribbean Cruises ("RCL") had been a big performer even before Standard & Poor's announced after the close on December 1 that it would be added to the S&P 500 index. On December 2nd, shares gained an additional 6%, closing at $76.75 for a total return since my recommendation in November, 2013 of approximately 82%.

With a $650mm market cap, ChipMos ("IMOS") is a good example of a small-cap name widely owned in Peattie Capital portfolios. I have recommended it thrice since August, 2012. In typical small cap fashion, the shares have experienced significant volatility with several 30% corrections. IMOS is simplifying its ownership structure and recently re-started its dividend payment. In addition, it recently announced a new share repurchase program. I continue to like IMOS very much and expect that it will continue to appreciate, corrections and all.

Stock picking continues to shine

Regardless, I believe that paying the right prices to own the right stocks is a good approach to the market. For some clients, depending on their specific characteristics, I might also overlay a tactical hedging program to protect against material downdrafts which might consist of boxing existing long postions, shorting, or raising cash.

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from November 30.

This chart shows all PCM's recommendations for the past 41 months showing an average return of +44.9%.
The total return on the S&P 500 from July 2, 2011 through November 30, 2014 was approximately +59%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
11/4/14	Marine Harvest	MHG	Buy	$13.95	$14.30	2.5%
9/1/14	Veeva Systems	VEEV	Buy	$30.00	$32.85	9.5%
8/5/14	Sealed Air	SEE	Buy	$32.70	$39.53	21.3%
8/5/14	KVH Industries	KVHI	Buy	$12.65	$12.22	-3.4%
7/3/14	Texas Pacific**	TPL	Buy	$160.00	$191.03	19.4%
6/3/14	Ingredion	INGR	Buy	$76.50	$83.23	9.9%
4/2/14	Questcor*	QCOR	Buy	$68.00	$89.15	31.5%
4/2/14	SodaStream	SODA	Buy	$43.50	$21.98	-49.5%
3/5/14	Whistler Holdings	WSBHF	Buy	$14.20	$17.27	25.1%
1/8/14	ChipMOS	IMOS	Buy	$19.00	$20.84	10.4%
12/5/13	Sealed Air	SEE	Buy	$31.50	$39.53	27.1%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$29.39	66.5%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$73.74	74.9%
10/2/13	JP Morgan	JPM	Buy	$52.00	$60.16	19.4%
9/6/13	Owens-Illinois**	OI	Buy	$29.25	$30.05	2.7%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$47.73	17.6%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$70.30	41.7%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$20.84	63.7%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$65.17	41.2%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$22.28	23.1%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$13.10	-1.1%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$22.55	21.5%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$12.22	-3.0%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$66.11	131.5%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$20.84	84.9%
7/3/12	SeaDrill**	SDRL	Buy	$37.50	$35.60	11.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$12.22	33.6%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$121.67	142.1%
3/6/12	du Pont	DD	Buy	$50.50	$71.40	49.3%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$44.03	75.8%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$70.30	185.5%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$12.22	62.3%
10/3/11	Apple	AAPL	Buy	$50.00	$118.93	147.3%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$12.22	30.3%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill**	SDRL	Buy	$35.73	$35.60	26.3%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$12.22	9.2%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

There is no recommended stock for December

Please don't hesitate to contact me with question or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

November 4, 2014

Range of Returns	October	YTD

All PCM Accounts	0.6% - 3.0%	6.5% - 13.9%
S&P 500	2.3%	9.2%

Finally, the correction

The market's selloff and subsequent rally has so far played out in textbook fashion with a nearly 10% drop in many indices. While it's impossible to say whether we've seen the low for the year, the recent rally from mid October suggests to me we have. The good news is that the median rise to the next peak has been 17.5%, which would be another nine percentage point gain from October's closing levels according to the November 3 Barron's.

Not surprisingly, most Peattie Capital portfolios dropped as well, but it remains my belief that the correction was a necessary and healthy part of long term investing. There is no change to my opinion that the environment for U.S. equities remains favorable.

For the year, most portfolios are up high single digits to low double digits, with several portfolios slightly below that. These portfolios consist mainly of smaller names, and I note that the Russell 2000 small cap index is barely positive for the year.

Most clients care primarily about loss of principle, and so I am always concerned with managing risk. Stated differently, beating an index is not nearly as important as preserving and growing capital prudently.

10 Reasons for optimism

There are many reasons for my continued optimism.

1. Earnings have been beating estimates and profit growth for the quarter is +7.5% for the 360 S&P 500 companies that had reported through October 30 (Source: Richard Russell October 31, 2014).

2. The six month period following the mid-term elections is the strongest six-month period of the Presidential Cycle.

3. The U.S. economy continues its slow and steady expansion, with real GDP growth expected to near 3% in the second half of 2014 and between 2.5 - 3.0% in 2015.

4. Overly optimistic sentiment indicators corrected with the September/October selloff, and while they didn't reach extreme pessimism, they did retreat significantly.

5. Signs of a pending recession are nowhere to be found: (Examples: an inverted yield curve, rising unemployment, falling consumer confidence).

6. The drop in oil prices will provide a solid tailwind for increased consumer spending, which is roughly 65% of U.S. GDP.

7. Unemployment is improving.

8. Last week the Bank of Japan surprisingly increased its version of "QE" extending the favorable liquidity environment.

9. Returns on bonds remain negligible and represent "return free risk" at today's levels as far as I'm concerned.

10. Both the Dow Jones Industrial and Transportation Indices set new highs last week, which many people believe is a bullish signal.

Several large positions reported terrific earnings

Last month I mentioned four companies that are held in every portfolio. Since then, three of them have reported outstanding earnings, and shares have responded by trading at or above all-time highs. The fourth hasn't reported yet but announced two new major contracts, and the shares have gained over 10%.

Macquarie Infrastructure Trust ("MIC") increased the annual dividend by over 12% to $3.92 and shares bounced from ~$65 to nearly $72. At this price, the yield is nearly 5.5%. MIC has returned 188% since I first recommended it in November, 2011 at $27.71. I believe the distribution will continue to grow.

Sealed Air ("SEE") delivered its third consecutive "beat and raise" quarter on strong free cash flow and continuing price increases.

Seagate ("STX") followed up its increased revenue guidance from its analyst day with the announcement of a 26% dividend increase, and then reported strong earnings growth a couple days after that.

KVH Industries's ("KVHI") has had a difficult year due to lumpiness with its Fiber Optic Gyro sales, and removed any potential contribution to earnings from them for this year in its second quarter earnings call. Subsequently, two major orders have come in, and shares have recovered some of their drop, and are now roughly even on the year. KVHI reports earnings next Monday, November 10.

I continue to believe that a well-constructed equity portfolio represents the best way to both preserve and grow wealth from today's levels.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from October 31.

This chart shows all PCM's recommendations for the past 40 months showing an average return of +44.9%.
The total return on the S&P 500 from July 2, 2011 through October 31, 2014 was approximately +56%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
9/1/14	Veeva Systems	VEEV	Buy	$30.00	$29.78	-0.7%
8/5/14	Sealed Air	SEE	Buy	$32.70	$36.25	11.3%
8/5/14	KVH Industries	KVHI	Buy	$12.65	$12.92	2.1%
7/3/14	Texas Pacific**	TPL	Buy	$160.00	$191.03	19.4%
6/3/14	Ingredion	INGR	Buy	$76.50	$77.25	2.1%
4/2/14	Questcor*	QCOR	Buy	$68.00	$89.15	31.5%
4/2/14	SodaStream	SODA	Buy	$43.50	$22.04	-49.3%
3/5/14	Whistler Holdings	WSBHF	Buy	$14.20	$16.69	21.0%
1/8/14	ChipMOS	IMOS	Buy	$19.00	$21.48	13.8%
12/5/13	Sealed Air	SEE	Buy	$31.50	$36.25	16.7%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$30.14	70.8%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$67.97	61.5%
10/2/13	JP Morgan	JPM	Buy	$52.00	$60.48	20.0%
9/6/13	Owens-Illinois**	OI	Buy	$29.25	$30.05	2.7%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$47.26	16.5%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$71.64	42.4%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$21.48	68.7%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$64.43	37.8%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$21.56	19.1%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$16.43	24.0%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$24.18	29.7%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$12.92	2.5%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$62.83	118.8%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$21.48	89.2%
7/3/12	SeaDrill**	SDRL	Buy	$37.50	$35.60	11.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$12.92	41.2%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$112.33	123.5%
3/6/12	du Pont	DD	Buy	$50.50	$69.15	44.9%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$47.98	87.6%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$71.64	186.8%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$12.92	71.6%
10/3/11	Apple	AAPL	Buy	$50.00	$108.00	124.5%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$12.92	37.7%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill**	SDRL	Buy	$35.73	$35.60	26.3%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$12.92	15.5%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

Recommended stock for November: Marine Harvest ("MHG")

Marine Harvest ("MHG"), the world's largest salmon farming company, began trading in New York in January, 2014. It is profitable, pays an attractive dividend, has been growing revenues 20% annually for the past 10 years, and has been free cash flow positive for eight consecutive years. Salmon is sold in 160 of the world's 198 countries, and with more affluent consumers looking for healthy choices, demand is growing 6%-7% annually, according to Victor Puchi, Chairman of AquaChile, the largest Chilean owned salmon farmer.

At the same time, supply growth is minimal as farmers meet increasing regulatory requirements in several areas while others are already running at or near full capacity. The resulting supply/demand imbalance will support increasing prices and profitability. According to an October 31 MHG presentation, prices are expected to reach 40 Norwegian kroner (currently 38) in Q4 and remain above 40 kroner for 2015. The company's breakeven operating level is estimated at 25 Norwegian kroner.

MHG is run by billionaire Norwegian businessman John Fredriksen and operates in a consolidating industry. It has no following among the major U.S. investment firms that I can find, which is also a plus as far as I'm concerned. I am recommending buying MHG up to $13.95.

Please don't hesitate to contact me with question or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

October 6, 2014

Range of Returns	September	YTD

All PCM Accounts	(4.8%) - (2.6%)	3.4% - 13.0%
S&P 500	(1.6%)	6.7%

Volatility returns....

September was an exceptionally difficult month for Peattie Capital portfolios as late-month selling drove prices down, in some cases significantly. Most Peattie Capital clients are primarily interested in growth and my own bias is towards smaller names and special situations where inefficiencies and lack of coverage present compelling long-term opportunities.

Small stocks in particular have been poor performers this year as larger institutional investors have shunned them in anticipation of the end of Quantitative Easing. Through September, total returns for small cap stocks have been negative, with returns of -2.6% (value) and -4.9% (growth). In comparison, total returns for large caps have been solidly positive, with returns of 7.2% and 9.4% respectively, and the total return of the Dow Jones Industrial Average has been 4.6%. (Source: Hays Market Advisory 10/2/2014)

For the year-to-date, most portfolios are up mid-high single digits, with the best portfolios up double digits. Not surprisingly, they are more defensive, with an abundance of dividend-paying and large cap names in them. I have tweaked a few portfolios and raised bits of cash in a few cases, but for the most part I view this selloff as an overdue and necessary part of a long-term investment scenario. So far, I don't see any reason to change my approach or strategy, and I am watching and following positions very closely.

I still believe that interest rates will be "lower for longer"

The (roughly) 2.50% yield on the US 10-year note is higher than most developed countries' yield and for the time being will continue to attract global funds. So I don't see a runaway spike in rates (at least not now). Some other yields are Germany 1%, Japan 0.5%, France 1.3%, and the United Kingdom 2.4%. At 2.3%, even Italy has a lower yield! Which would you rather buy, a US 10-year note yielding 2.5% or an Italian note at 2.3%?

In addition, the US economy remains on a slow but steady growth trajectory, although recent data has been a bit more mixed. Other global economies are struggling, and inflation is below the Fed's stated 2% target. Given these factors, I just don't see the reasoning behind an accelerated rise in rates.

I've said repeatedly that a 5-10% correction would be normal and healthy. However every time the market drops 2-3% buyers come in and the market subsequently rallies to a new high. While the late September/early October selloff feels a bit "heavier", Friday's unemployment report supports the "steady US economy" theory.

Ebola, ISIS, the Ukraine, and other global headlines do not drive long-term investment success, but they do make for attention-grabbing headlines. I'm much more interested in the interplay of valuation, liquidity and sentiment, a model successfully deployed by Hays Advisory, and with the exception of sentiment (which had gotten too frothy) these "legs of the stool" continue to suggest a favorable environment for equities.

Three times in 2014 (in February, May, and now September) the Russell 2000 small cap index has dropped to the 1090 level, and each time it has subsequently bounced. In addition, according to this week's Barron's, in the 17 midterm election years since 1946, the S&P 500 has delivered a positive return, averaging 17.5% for the twelve months measured from October 31 of the midterm year to the following October 31st. While neither of these factoids guarantees the same results again, I like the odds.

A quick review of a few core holdings

KVH Industries's ("KVHI") marine satellite communications system continues to roll out nicely and will represent 60% of the company's revenues exiting the 3rd quarter. Unfortunately, it's fiber optic gyro ("FOG") division is extraordinarily lumpy, and management recently reduced 2014 earnings because of an unexpected slowdown in this division. In addition, KVHI is a micro cap growth company and will likely be a source of liquidity as year end approaches. I continue to believe that KVHI will succeed, and I am hoping to buy more on any weakness.

Macquarie Infrastructure Trust ("MIC") has dipped from over $72 to a recent $65, even though management has continued to return capital to unit holders through an increasing dividend. MIC is restructuring its portfolio by divesting a small division and buying the portion of another division that it didn't already own. These steps will streamline and simplify operations and hopefully lead to a higher multiple. Even if that doesn't happen, management is committed to returning 80-90% of operating income to holders, which suggests that the $3.80 annual distribtution will grow as well. At $66, the current yield is 5.75%.

Sealed Air ("SEE") continues to raise prices, slowly but surely. In addition, management has established a bonus program which requires aggregate free cash flow to exceed $1.6bn for the three years 2014-2016. I like this approach because free cash flow is difficult to manipulate (unlike earnings) and also tends to be a good indicator of the overall health and direction of the company. Through the second quarter, SEE is well ahead of pace and I expect the company to meet its goal.

Seagate ("STX") made a persuasive case for the demand for its products at its analyst day in early September. I particularly like industries that have consolidated, and STX and its primary competitor Western Digital ("WDC") have roughly 85% market share of the disk drive industry. Even better, the market seems to believe that STX's fortunes are dependent on PCs, which isn't the case, as far as I can tell. STX also raised revenue guidance and currently trades at 12x (trailing earnings) and yields over 3%.

I continue to believe that a well-constructed equity portfolio represents the best way to both preserve and grow wealth from today's levels.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from September 30.

This chart shows all PCM's recommendations for the past 39 months showing an average return of +44.1%.
The total return on the S&P 500 from July 2, 2011 through September 30, 2014 was approximately +52.3%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
9/1/14	Veeva Systems	VEEV	Buy	$30.00	$28.17	-6.1%
8/5/14	Sealed Air	SEE	Buy	$32.70	$34.88	7.1%
8/5/14	KVH Industries	KVHI	Buy	$12.65	$11.32	-10.5%
7/3/14	Texas Pacific	TPL	Buy	$160.00	$191.03	19.4%
6/3/14	Ingredion	INGR	Buy	$76.50	$75.79	-0.4%
4/2/14	Questcor*	QCOR	Buy	$68.00	$89.15	31.5%
4/2/14	SodaStream	SODA	Buy	$43.50	$29.49	-32.2%
3/5/14	Whistler Holdings	WSBHF	Buy	$14.20	$16.33	18.4%
1/8/14	ChipMOS	IMOS	Buy	$19.00	$22.62	19.1%
12/5/13	Sealed Air	SEE	Buy	$31.50	$34.88	12.4%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$27.83	57.7%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$67.29	59.2%
10/2/13	JP Morgan	JPM	Buy	$52.00	$60.24	18.8%
9/6/13	Owens-Illinois**	OI	Buy	$29.25	$30.05	2.7%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$47.27	16.5%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$66.70	33.2%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$22.62	76.4%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$63.99	36.9%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$22.30	23.2%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$20.80	57.0%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$26.05	39.0%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$11.32	-10.2%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$57.27	100.2%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$22.62	99.1%
7/3/12	SeaDrill**	SDRL	Buy	$37.50	$35.60	11.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$11.32	23.7%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$110.90	120.7%
3/6/12	du Pont	DD	Buy	$50.50	$71.76	50.0%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$52.64	104.0%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$66.70	169.0%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$11.32	50.3%
10/3/11	Apple	AAPL	Buy	$50.00	$100.75	110.0%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$11.32	20.7%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill**	SDRL	Buy	$35.73	$35.60	26.3%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$11.32	1.2%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

There is no recommended stock for October

Please don't hesitate to contact me with question or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

September 1, 2014

Range of Returns	August	YTD

All PCM Accounts	3.2% - 6.5%	8.4% - 16.0%
S&P 500	3.7%	8.3%

Strong gains in three core holdings drive terrific month for Peattie Capital portfolios

Peattie Capital portfolios had a terrific August with huge gains in Texas Pacific Land Trust ("TPL") of 18%, Tronox ("TROX") 12.6%, and Sealed Air ("SEE") 12.4%. Each of these is a Peattie Capital recommended stock.

Most portfolios had an outstanding month, and once again the best performing portfolios were those weighted toward large cap names and dividend payers and the weaker performing portfolios were those weighted towards small cap and growth. I am pleased that for the year to date, most portfolios are up in the low double digits net of fees, well ahead of the S&P 500.

US economy continues to roll

The recent GDP figures were +4.2% for Q2, confirming what I have said several times, which is that the first quarter was severely impacted by weather. A variety of indicators signal continued slow but steady expansion overall, with no sign of a recession in sight. As far as I'm concerned, that is a favorable environment for equities, insofar as it goes.

The other elements I consider are valuation, which, overall is acceptable given the level of rates, and sentiment, which corrected from somewhat overly optimistic levels in early August when the markets dipped. In addition, the headlines are helping, with the Middle East, Ukraine and a soft European economy generating the "wall of worry" that is usually helpful to equities.

I've said several times that I wouldn't be surprised to see a 5-10% correction somewhere along the way, which would be normal and healthy. However every time the market drops 2-3% buyers come in and the market subsequently rallies to a new high. Buying into a rising market is difficult, and good stock picking will be increasingly important at today's higher levels.

A quick review of compounding

What happens to $1mm over 10 years in different return scenarios? At 4% annually it grows to $1,480,244 and at 8% it grows to $2,158,925. Over 20 years those numbers are $2,191,123 and $4,660,957 respectively.

All well and good, but using today's 2.4% 10-year Treasury note, that $1mm becomes $1,267,650 and $1,606,938 respectively. In addition, bonds lose value as rates rise, so a bond holder risks taking a loss if he/she needs to sell before maturity. Either way, bond buyers face a dilemma, and I think a well-researched and carefully constructed equity portfolio has a far better chance of success for the next 10 years from today's levels, despite the inevitable bumps that will happen.

Conclusion: I live in an equities world, and I recommend any serious investor consider the benefits of doing so too.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from August 29.

This chart shows all PCM's recommendations for the past 38 months showing an average return of +48.8%.
The total return on the S&P 500 from July 2, 2011 through August 29, 2014 was approximately +53.8%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
8/5/14	Sealed Air	SEE	Buy	$32.70	$36.10	10.4%
8/5/14	KVH Industries	KVHI	Buy	$12.65	$12.43	-1.7%
7/3/14	Texas Pacific	TPL	Buy	$160.00	$200.56	25.4%
6/3/14	Ingredion	INGR	Buy	$76.50	$79.76	4.8%
4/2/14	Questcor*	QCOR	Buy	$68.00	$89.15	31.5%
4/2/14	SodaStream	SODA	Buy	$43.50	$33.34	-23.4%
3/5/14	Whistler Holdings	WSBHF	Buy	$14.20	$16.85	22.1%
1/8/14	ChipMOS	IMOS	Buy	$19.00	$23.93	25.9%
12/5/13	Sealed Air	SEE	Buy	$31.50	$36.10	15.8%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$28.98	64.2%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$63.76	50.9%
10/2/13	JP Morgan	JPM	Buy	$52.00	$59.45	17.3%
9/6/13	Owens-Illinois	OI	Buy	$29.25	$30.79	5.3%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$49.49	20.0%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$72.13	43.3%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$23.93	86.6%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$57.45	24.0%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$23.49	29.8%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$23.69	78.8%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$30.36	59.3%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$12.43	-1.3%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$62.58	117.9%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$23.93	110.5%
7/3/12	SeaDrill**	SDRL	Buy	$37.50	$35.60	11.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$12.43	35.8%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$110.29	119.5%
3/6/12	du Pont	DD	Buy	$50.50	$66.11	37.9%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$55.70	114.7%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$72.13	188.6%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$12.43	65.1%
10/3/11	Apple	AAPL	Buy	$50.00	$102.50	113.5%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$12.43	32.5%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill**	SDRL	Buy	$35.73	$35.60	26.3%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$12.43	11.1%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

Recommended stock for September: Veeva Systems ("VEEV")

VEEV operates at the intersection of health care and the cloud, and just reported a terrific quarter. Revenues were up 53% vs. last year to $76mm and subscription revenues were up 66% to $57mm. VEEV is profitable (even on a GAAP basis), which is rare for such a fast growing company, and has no debt. Cash flows from operations grew 130% (to $16.6mm), a faster rate than revenues, net income or earnings per share. On the conference call the CEO stated twice that "the business is firing on all cylinders."

VEEV came public last October, and is likely underowned by growth investors. However, VEEV is presenting at Citi's investment conference this week, and is hosting an analyst day in New York City on Sept. 17, so that could change very soon. While I would normally avoid such an expensive stock, in this case it compares favorably with say, Workday ("WDAY") which is unprofitable and trades at twice the sales multiple (25x vs. 12x).

I expect VEEV to be a volatile stock, but I think the chances for appreciation from today's levels are very good, and I recommend purchasing shares up to $30.

Please don't hesitate to contact me with question or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

August 5, 2014

Range of Returns	July	YTD

All PCM Accounts	(1.4%) - 1.1%	3.8% - 10.4%
S&P 500	(1.5%)	4.5%

Macquarie Infrastructure and KVH Industries make big announcements

Peattie Capital's two largest positions both made major strategic announcements in early July, positioning themselves for further growth. Macquarie Infrastructure Trust ("MIC") bought the ~50% of its International-Matex Tank Terminal subsidiary it didn't already own and also announced its intention to raise the dividend again, this time to $0.95 per quarter. When I first recommended MIC in November, 2011, the quarterly payout was $0.20 and the shares were ~$27. MIC still has room to grow, and the company has stated its intention to payout of 80%-85% of proportionate free cash flow, which is expected to be $4.55 in 2014 and over $5 in 2015.

MIC gained nearly 12% in July and has returned over 176% since I recommended it in November, 2011.

KVH Industries ("KVHI") announced it was buying Videotel, "a producer of high-quality training films and e-learning services for the commercial maritime industry." Videotel already services 11,000 vessels and is expected to create meaningful cross-selling opportunities for KVHI. In addition, 93% of Videotel's revenues are subscription-based, and gross margins are over 73%. Marine satellite-based communications is an evolving industry and I am very excited about KVHI's position in it.

Defensive portfolios outperforming growth

Most portfolios had positive returns in July as a result of the big gains in MIC and other core positions which held their gains even through the late-month correction. The best performing portfolios are those that either focus on dividends (and dividend growth) or larger, more defensive names, or both. For several clients, Peattie Capital is buying smaller, more growth oriented names, and not surprisingly, they are the weakest portfolios this year. Small caps are down across the board through July, with small cap growth the poorest performing equity asset class at -4.6%.

I attribute this to the tapering of the Fed's quantitative easing ("QE") program, as smaller names tend to perform best when liquidity is most plentiful.

Is good news bad news?

For quite a while the markets have responded favorably to all economic news. However, we may be entering, a new phase, wherein good news is bad news, as it may bring forth an earlier than expected end to QE. My own guess is that Janet Yellen will stay on her stated course, as changing it would lead to more confusion and possibly damage her credibility.

To be sure, there are myriad issues cited for the market's recent performance. Among them: the upcoming change in monetary policy and Yellen's highlighting a couple specific sectors, military activity in the Middle East and Ukraine, and election-year politics heating up in the U.S, along with a variety of domestic issues such as Obamacare, and the VA affair.

In addition, sentiment indicators are flashing yellow as too many investors are either optimistic or complacent, and I would much prefer to be buying stocks when sentiment is negative. As to valuation, broadly speaking the markets are neither cheap nor expensive, as the average trailing price-earnings ratio for the S&P 500 is 17x when inflation is between 0-4% (Source: Byron Wien), which is about where we are now.

I've said several times that I wouldn't be surprised to see a 5-10% correction somewhere along the way, which would be normal and healthy. However I don't see that as a game-changer and nor do I see a recession looming. 2014 is shaping up in a manner somewhat similar to 2004, also a mid-term election year, in which the markets were choppy and flat through September, and then returned nearly 10% in the fourth quarter.

Still plenty of tailwinds

On the plus side, the economy is, actually, growing, with the attendant pick up in employment. Second, earnings are growing; third, liquidity is still plentiful; fourth, merger activity is alive and well; fifth, absolute rates are extraordinarily low by historical standards; sixth, oil prices are falling after spiking on the turmoil in Iraq; seventh, corporate balance sheets are very strong; eighth, equities still represent a viable alternative to bonds; ninth, lending and capital spending is accelerating, and tenth, when the market is up 25% or more, the next year is usually positive and has been in every such year since 1990. (Source: IBID)

A few brief stock comments:

Sealed Air ("SEE") raised the outlook for 2014 net sales, adjusted EBITDA and free cash flow.

MakeMyTrip ("MMYT") generated $4.2mm in operating cash flow in the June quarter, after losing $7mm in last year's June quarter.

Genesis Energy ("GEL") reported adjusted EBITDA growth of 18.9% to $70.1mm and total available cash before reserves grew 21.4% to $55mm.

Texas Pacific Land Trust ("TPL") increased EPS in Q2 2014 to $1.17, a 65% gain over Q2 2013. For the six months, TPL earned $2.03 per share, a 72% gain over the first six months of 2013.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from July 31.

This chart shows all PCM's recommendations for the past 37 months showing an average return of +48.8%.
The total return on the S&P 500 from July 2, 2011 through July 31, 2014 was approximately +50.1%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
7/3/14	Texas Pacific	TPL	Buy	$160.00	$169.94	6.2%
6/3/14	Ingredion	INGR	Buy	$76.50	$73.63	-3.2%
4/2/14	Questcor*	QCOR	Buy	$68.00	$89.15	31.5%
4/2/14	SodaStream	SODA	Buy	$43.50	$33.00	-24.1%
3/5/14	Whistler Holdings	WSBHF	Buy	$14.20	$15.89	13.6%
1/8/14	ChipMOS	IMOS	Buy	$19.00	$23.52	23.8%
12/5/13	Sealed Air	SEE	Buy	$31.50	$32.12	3.2%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$30.27	71.5%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$59.65	41.3%
10/2/13	JP Morgan	JPM	Buy	$52.00	$57.67	13.9%
9/6/13	Owens-Illinois	OI	Buy	$29.25	$31.19	6.6%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$51.80	25.3%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$69.72	37.0%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$23.52	83.4%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$55.74	18.8%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$22.92	26.6%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$22.37	68.8%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$26.54	40.2%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$13.01	3.3%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$58.60	103.2%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$23.52	107.0%
7/3/12	SeaDrill**	SDRL	Buy	$37.50	$35.60	11.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$13.01	42.2%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$106.93	112.8%
3/6/12	du Pont	DD	Buy	$50.50	$64.31	34.4%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$52.49	101.4%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$69.72	176.5%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$13.01	72.8%
10/3/11	Apple	AAPL	Buy	$50.00	$95.57	98.7%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$13.01	38.7%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill**	SDRL	Buy	$35.73	$35.60	26.3%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$13.01	16.2%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

Recommended stocks for August: Sealed Air ("SEE") and KVH Industries ("KVHI")

SEE continues to do all the right things to maximize shareholder value while simultaneously managing to "beat and raise" earnings estimates. The litigation and settlement with W.R. Grace is beginning to recede and the company's cash flow is soaring. I'm a little surprised the shares are still trading in the low $30s and I reiterate my buy recommendation up to $32.70.

KVHI continues to struggle with its lumpy business model, wherein its fiber optic gyro ("FOG") business is beholden to defense spending. However, its global marine satellite communications business is growing nicely (albeit slower than I would like). As a microcap it is particularly volatile, and has had several 30% corrections over the years. Nonetheless, it is attractively priced today below $13, and I recommend buying shares up to $12.65.

Please don't hesitate to contact me with question or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

July 2, 2014

Range of Returns	June	YTD

All PCM Accounts	0.5% - 3.6%	4.7% - 9.5%
S&P 500	1.9%	6.0%

MakeMyTrip soars 38%

June was another good month for Peattie Capital portfolios. For the second straight month, the biggest performer was MakeMyTrip ("MMYT"), which gained 38%, and has now gained 99% since I recommend it in December. I repeat that MMYT is not yet profitable and I expect it will be volatile. Nonetheless, this Indian online travel company will remain in Peattie Capital portfolios for now.

It has been 36 months since I began recommending stocks in this newsletter, during which time I've made 40 recommendations. 12 of the 40 stocks (30%) have gained over 88% (total return of S&P 500 ~51%), led by Macquarie Infrastructure Trust ("MIC") which has returned 150% since I originally recommended it in November, 2011. Peattie Capital portfolios typically have 20-25 positions, so I am not just "cherry picking" from a large sample. Good stock picking will be increasingly important now that the indexes have had such strong performance.

Every asset class had a positive first half of the year, (U.S. stocks, International stocks, Treasuries, Real Estate, and Commodities), with the weakest subsector in U.S. equities being small cap growth which is only up 1.6%. A number of Peattie Capital's portfolios have several positions in this category, and that has held back their performance somewhat. The best performing portfolios overall have been those with a predominance of larger names.

Making the correct call to stay long has been helpful, but focusing on stock picking has been the most important factor in generating significant profits for Peattie Capital clients. While I still like the environment overall, I am being very selective re-deploying the cash I raised after recent sales, such as the big gain from selling Questcor ("QCOR") on the announcement of its sale to Mallinckrodt ("MNK").

Economy is still OK, despite a soft GDP revision

I continue to view the recent downwardly revised GDP report as something of an anomaly, and believe that the positive developments in the U.S. outweigh the negative ones. In particular, I like that business borrowing is starting to pick up, that housing statistics have bounced back and that merger activity has been active. According to a June 30 article in the FT (M&A vital signs show return to vigour), "the value of global M&A hit $1.75 tn during the six months to July, an increase of 75% over 2013, and the strongest year-on-year increase since the late 1990's."

In addition, the June ISM report came in at 55.3, a slight decline from May, but still comfortably above the six-month average of 54.5 and past 12 month average of 54.9. June car sales came in above the 16.3mm consensus estimate SAAR (seaonally adjusted annual rate) which is also good news. I include these numbers because they include data from June, the first releases to do so, and suggest a stable economic environment.

Staying involved

Marketing comment

In a recent conversation, a potential Peattie Capital prospect said he liked his hedge fund investment, because it wasn't correlated to the equity markets. "That's all well and good, but how did it perform during the two crashes of the past 14 years?" I asked. He answered "Well, it has only been around since 2009 so no one knows."

As far as I'm concerned, knowing the environment is a critical component to investing. My guess is that someday such a strategy will be useful for some investors (provided it performs as advertised). In the meantime, who wants to be uncorrelated to such a powerful market?

And one more thought: Beware marketing blather!

A few brief stock comments:

Sealed Air ("SEE") announced a share buyback and continues to see price increases sticking.

Energy Transfer Partners ("ETP") announced two new pipelines last week, one from the Bakken shale to Patoka, Il., and the other from Marcellus/Utica shale to several diverse markets and end users. The pipelines are expected to be operational in about two years.

Hertz ("HTZ"), while not a Peattie Capital recommended stock, is owned in many portfolios and early in June the company announced that its 2011 financial were no longer to be considered reliable. Shares corrected ~10%, but subsequently have regained about half that as the market probably doesn't care about non-cash items from three years ago. That said, one of my biggest fears as an investment manager is that management will behave fraudulently.

duPont ("DD") DD cut it's earnings forecast for the year and the shares have dropped ~6%. I still like the transformation at DD and believe that the long-term story is in place.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from June 30.

This chart shows all PCM's recommendations for the past 36 months showing an average return of +49.7%.
The total return on the S&P 500 from July 2, 2011 through June 30, 2014 was approximately +51.3%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
6/3/14	Ingredion	INGR	Buy	$76.50	$75.04	-1.9%
4/2/14	Questcor*	QCOR	Buy	$68.00	$89.15	31.5%
4/2/14	SodaStream	SODA	Buy	$43.50	$33.60	-22.8%
3/5/14	Whistler Holdings	WSBHF	Buy	$14.20	$16.83	20.2%
1/8/14	ChipMOS	IMOS	Buy	$19.00	$24.13	24.0%
12/5/13	Sealed Air	SEE	Buy	$31.50	$34.17	9.7%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$35.13	99.0%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$55.60	31.8%
10/2/13	JP Morgan	JPM	Buy	$52.00	$57.62	13.0%
9/6/13	Owens-Illinois	OI	Buy	$29.25	$34.64	18.4%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$52.90	27.9%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$62.37	23.3%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$24.13	88.1%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$57.97	23.2%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$24.3	34.4%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$23.00	73.6%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$26.90	42.0%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$13.03	3.4%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$56.82	97.3%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$24.13	112.3%
7/3/12	SeaDrill**	SDRL	Buy	$37.50	$35.60	11.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$13.03	42.4%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$102.30	103.6%
3/6/12	du Pont	DD	Buy	$50.50	$65.44	36.6%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$56.04	113.9%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$62.37	149.9%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$13.03	73.0%
10/3/11	Apple	AAPL	Buy	$50.00	$92.93	93.4%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$13.03	38.9%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill**	SDRL	Buy	$35.73	$35.60	26.3%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$13.03	16.4%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

Recommended stock for July: Texas Pacific Land Trust ("TPL")

TPL has an unusual mandate, which requires the company to repurchase shares continually with available cash flow...of which there has been, and will continue to be, plenty. When I spoke to the Treasurer, he jokingly said: "Around here, we're all wondering who the last shareholder will be."

TPL was set up in 1888, and currently owns 911,000 acres in west Texas, down from roughly 1,000,000 acres in 1995. Periodic land sales complement ongoing oil royalties and modest grazing fees which the Trust uses to reduce shares, which are currently 8.3mm, down from 15.4mm in 1995. In other words, in the past 14 years TPL has reduced its shares outstanding by 50%, while acreage has only dropped about 9%.

To be sure, the boom in oil and gas production has been good for TPL. Last June Chevron and Cimarex formed a joint venture combining their acreage in Culberson County, much of which is on land where TPL holds royalty rights, which otherwise was problematic to drill separately. The ensuing opportunity appears to enhance TPL's revenues significantly.

At some point there could be a glut, and a cutback in production would be be a negative. However the mandate to repurchase shares will not go away, and if the U.S. gives a green light to exporting oil and gas (which appears to be happening), that could impact TPL favorably. In 2013 TPL's average price received per barrell of oil was $91.56 and gas $4.29, and spot prices for both these items have risen over 10% in 2014. Internal compounding is a wonderful thing for long term shareholders, and I recommend buying TPL up to $163.

Please don't hesitate to contact me with questions or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

June 3, 2014

Range of Returns	May	YTD

All PCM Accounts	2.3% - 4.8%	3.8% - 7.5%
S&P 500	2.1%	4.1%

May was a terrific month for Peattie Capital portfolios

In May, every Peattie Capital portfolio beat the S&P's 2.1% performance, and a number of Peattie Capital stock recommendations soared. Among the big winners were Make My Trip ("MMYT") which gained 21%, and ChipMos ("IMOS") which gained 16%. Both these names are small and MMYT is particularly speculative, so they can be volatile. However they are both worth holding, especially in growth-oriented portfolios.

Other big winners included SBA Communications ("SBAC") which gained 13%, Tronox ("TROX") which gained 9%, Maquarie Infrastructure ("MIC") which returned 8%, and Questcor ("QCOR") which was up 9%. As I mentioned last month, QCOR is being purchased by Mallinckrodt ("MNK"), and I have closed that position for a 31% gain since its recommendation on April 2. It's worth reiterating that Peattie Capital portfolios typically have 20-25 positions, so I am not just "cherry picking" from a large sample.

A quick glance at the table below shows that 7 of the 40 recommendations I've made since July 2011 have returned over 100% in the past couple years, led by a 146% return in MIC and a 140% return in Carters ("CRI"), both of which were recommended twice. Meanwhile only two recommendations are negative, with small losses. Making the correct call to stay long has been helpful, but focusing on stock picking has been the most important factor in generating significant profits for Peattie Capital clients.

Still a "buy and hold" market"

At some point this "buy and hold" environment will change and I watch a number of indicators for insight into when that might happen. Generally speaking, hedge funds tend to be much more active traders, which may explain their ongoing performance problems. A recent FT article ("Choppy trading wrongfoots hedge funds" May 21) stated "the average hedge fund is suffering the worst start to the year since the financial crisis, making just 1.2% according to the industry data provider Prequin.." When my hedge fund friends tell me they are "buying and holding" that will be a sign to me that this phase of the market may be nearing an end.

I reiterate what I said last month, which is that typically mid-term election years are bumpy, so I wouldn't be surprised to see a 5-10% correction somewhere along the way, which would be normal and healthy. Ned Davis Research recently published a note stating that when May's return is over 2%, then the subsequent June - October period averages a 3.9% return, compared to 2.7% otherwise. I don't invest based on seasonal tendencies, but it's helpful to know they exist.

Soft (ish) economic reports but directionally still good

The recent downwardly revised GDP number is largely attributable to the weather and a late Easter, as far as I'm concerned, and I expect economic activity to accelerate going forward. In addition, it was widely expected, and had little or no impact on the markets. Inventories were light, but that suggests to me re-stocking will begin, which I view as a net positive. Consumer spending was up 2.1% and final demand grew at +.6%. Monday's ISM report was the 13th consecutive monthly improvement, and, at 56.0, is well above the past 6-month average of 54.4. Bottom line: I don't see a recession on the horizon.

Holistic approach to the markets is paying off

Unlike many of my peers, I don't pursue any one investment style over another, or limit myself to stocks of a specific size. I believe in being flexible and opportunistic and will "go anywhere" in equities if I believe the opportunity is there. For the most part I am fundamentally driven, and believe earnings drive stock prices more than any other single factor. I am as comfortable owning a $200mm market cap company as I am a $50bn one.

In addition, I am constantly reviewing the overall environment for equities, based primarily on liquidity, valuations, and sentiment/psychology. Hays Advisory Group uses this framework, and I have been following it since early 2000, when I began managing money on a discretionary basis. I read a number of newsletters and equity strategists as well, such as David Rosenberg at Gluskin, Sheff, Whitney Tilson at Value Investor Insight, and also have an extensive network of other professional money managers, several of whom have over 30 years of industry experience.

Peattie Capital runs separate accounts rather than a fund for two reasons: First, I believe it's best for the client to have something that's created specifically for his (her) situation and second because a fund would likely grow too big over time to own small and micro cap companies, where there are inefficiencies and significant growth opportunities. Even a $25mm fund wouldn't be able to own say, KVH Industries ("KVHI"), which is widely held throughout Peattie Capital portfolios.

A few brief stock comments:

Barron's featured Cedar Fair ("FUN") in the current issue, a stock I recommended last August at $43.50. Shares (technically units) have returned 25% since then, and I continue to like this name, especially for income-oriented accounts.

Sodastream ("SODA") delivered its second consecutive disappointing quarter, and the shares have dipped about 14% since my recommendation in April. This one is on a very short leash.

Anytime KVHI dips below $13, I get interested in adding to my position. As I mentioned, this is the kind of name I can own in a material way in separate portfolios, which would be much more difficult to do in a fund.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from May 30.

This chart shows all PCM's recommendations for the past 35 months showing an average return of +49.2%.
The total return on the S&P 500 from July 2, 2011 through May 30, 2014 was approximately +49.4%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
4/2/14	Questcor*	QCOR	Buy	$68.00	$89.15	31.5%
4/2/14	SodaStream	SODA	Buy	$43.50	$37.10	-14.1%
3/5/14	Whistler Holdings	WSBHF	Buy	$14.20	$15.84	13.3%
1/8/14	ChipMOS	IMOS	Buy	$19.00	$24.41	28.5%
12/5/13	Sealed Air	SEE	Buy	$31.50	$32.93	5.4%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$25.61	45.1%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$55.29	30.5%
10/2/13	JP Morgan	JPM	Buy	$52.00	$55.57	9.1%
9/6/13	Owens-Illinois	OI	Buy	$29.25	$33.23	13.6%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$52.03	24.3%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$61.48	21.6%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$24.41	90.3%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$56.32	19.9%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$22.73	25.6%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$21.69	63.7%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$26.57	39.1%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$13.58	7.8%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$53.73	87.0%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$24.41	114.7%
7/3/12	SeaDrill**	SDRL	Buy	$37.50	$35.60	11.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$13.58	48.4%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$101.50	102.0%
3/6/12	du Pont	DD	Buy	$50.50	$69.31	43.4%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$57.00	117.3%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$61.48	146.7%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$13.58	80.3%
10/3/11	Apple	AAPL	Buy	$350.00	$633.00	88.4%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$13.58	44.8%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill**	SDRL	Buy	$35.73	$35.60	26.3%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$13.58	21.4%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

Recommended stock for June: Ingredion ("INGR")

Ingredion ("INGR"), a $6bn global food ingredient provider, was range-bound for over a year, but recently broke above resistance. Despite a difficult first quarter, especially in North America where it was hampered by the weather, INGR maintained its 2014 earnings guidance of $5.35-$5.75. I like the industry as there has been a spate of merger activity in it, and I view the company as a defensive play in developed countries but more growth oriented in emerging markets.

Over the past five years, INGR has grown revenues roughly 10% annually, and raised the dividend 20% annually on average. Currently the shares trade below the market, and yield 2.2%, so it fits for a number of Peattie Capital portfolios.

Estimates for 2015 are around $6.50, and even with a 15x multiple, that would generate a share price in the high $90s. Meanwhile, INGR could benefit from the industry's consolidation, as either an acquirer or acquiree. I recommend buying shares up to $76.50.

Please don't hesitate to contact me with questions or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

May 2, 2014

Range of Returns	April	YTD

All PCM Accounts	(-0.8%) - 2.1%	0.2% - 4.3%
S&P 500	0.6%	1.9%

Merger mania! Three Peattie Capital positions with big developments in April

In April's newsletter I recommended Questcor ("QCOR") and SodaStream, Int. ("SODA") both of which had a strong bounce after a big development, or in SODA's case the rumor of one. QCOR announced that it had agreed to be purchased by Mallinckrodt ("MNK") for a combination of cash and shares at a 30% premium. QCOR also announced first quarter results with sales gaining 68% year-over-year and earnings up 84%. I'm delighted that QCOR's results were so strong, but haven't decided yet whether to own MNK shares when the deal closes, which is expected in Q3. Shares of QCOR closed April over $82, returning 21% from my $68 recommended price on April 2.

SODA also bounced nicely in April after an early-month selloff when an Israeli newspaper reported that the company was in talks to sell a 10% stake to a large beverage company, subsequently identified as Starbucks ("SBUX"). While there hasn't been any additional news, SBUX reported earnings on April 24, and didn't deny the rumors. Regardless, I think SODA's chances for success are very good and for now I'm happy to own the shares.

Finally, I mentioned DirecTV ("DTV") last month as a cheap stock and Thursday morning brought headlines that AT&T ("T") was in talks to buy DTV, driving the shares up 6% to $82. DTV hasn't been a recommended stock, but it is in most portfolios.

Recall that last year recommended stocks Telular ("WRLS") and Mako Surgical ("MAKO") were purchased, and while I enjoy the windfall, I can't help but wonder how much more the shares may have delivered over time.

Indices flat but activity below the surface

The rotation towards value stocks has continued, with many well known growth names dramatically underperforming. Biotechs in particular have been hit hard, as a number of them have corrected over 20% after a huge run the past year or so. In addition, smaller names seem vulnerable, possibly anticipating less liquidity when tapering ends late this year.

Preference for larger, more value-oriented names tends to be associated with periods of uncertainty. Noteworthy to me is that funds aren't leaving the equity market, just being re-allocated more defensively, which by and large is fine.

The challenge for Peattie Capital's growth-oriented portfolios will be to manage this rotation smoothly. So far the more conservative Peattie Capital portfolios have outperformed those that are tilted towards growth, which is clearly reflected in the range of returns and summary performance of recommended stocks in the table below. Names like ChipMos and MakeMyTrip (which has the double whammy of the Indian election in May) have been caught up in the rotation away from growth and small caps. However I think the opportunity for each is that much better from these levels and have no plans to sell either name.

Still comfortable with the market, but not aggressive

As usual, there are plenty of both bullish and bearish factors right now, which is why I emphasize making investment decisions primarily on specific stock circumstances, with an eye on the overall environment. Here's a brief summary from Gluskin Sheff's David Rosenberg (April 29, "Breakfast with Dave").

Reasons not to be bearish: Bear markets happen when the Fed overtightens or the economy heads into recession, or both. Given that every leading indicator is signaling continued expansion, there is virtually no chance that GDP will go negative. In addition, Janet Yellen used the term " uncertainty" a couple weeks ago, not the kind of word that portends a Fed tightening.

Reasons not to be bullish: Last year's 30% gains came with only single digit earnings growth, and so we are in holding pattern and waiting for fundamentals to catch up. As a result, we will continue to see a grinding, rotating market with rolling corrections, much like what we've seen so far in 2014.

Near-term market moves will continue to be driven by technicals, fund flows, sentiment and valuation, but the major drivers are the economy, which is expanding, and liquidity, which is plentiful (and the Fed is still accomodative). So the trendline is still favorable even if valuations "limit future returns." For now the market seems range-bound, with with the Dow around 16,000-16,500 and the S&P meeting resistance around 1880, approximately 15.9x forward estimates.

Sell in May and go away? And it's mid-term election year too....

This widely quoted saying has merit, as historically the six-month period from November-April is demonstrably better for investors than the May-October period. In addition, the May-October period of the the mid-term election year, is the worst of the May-October periods of the Presidential cycle. In fact, the return for this period has been negative more than half the time since 1930 (Source: Hays Advisory May 1, 2014). According to the Stock Trader's Almanac (2010 edition) since 1971 NASDAQ is particularly volatile in mid-term election years and July is NASDAQ's worst month with an average loss of 3.4%.

That's the bad news. The good news is that the six-month period beginning November of the mid-term election year and ending April the following year is historically the best six-month period of the Presidential cycle, with a median return of 15.2% since 1930. Furthermore, the third year of the presidential cycle, next year, is by far and away the best year of the Presidential cycle (Source: Hays Advisory May 1, 2014).

In other words, historical patterns suggest a bumpy next six months, followed by a lengthy period of good performance. For my part, I am much more interested in fundamentals, earnings power and catalysts, but it's helpful to be aware of market tendencies.

Brief comments on recent recommended stocks

Sealed Air ("SEE") SEE's adjusted earnings per share grew 43% to $0.33 in the first quarter, and the company increased its full year free cash flow guidance from $410mm to $425mm. In addition, SEE is nearing the end of its litigation with W.R. Grace, and price increases are sticking. I remain optimistic about SEE.

KVH Industries ("KVHI") KVHI's marine satellie communications services continue to grow nicely and an April 3 Euroconsult survey named KVHI the market leader with a 26% market share of the satellite VSAT market, up from 16% two years ago. As of May 1, the company rolled out its IP Mobile Cast service, which should increase monthly ARPU significantly.

Apple ("AAPL") AAPL delivered the dividend increase I was expecting and also sold $12bn of debt to fund an increased share buy back program. The upside surprise in iphones sold and earnings helped as well, and the shares gained 10% in April. AAPL is a good name for many Peattie Capital portfolios, but I don't expect the shares to say, double from today's level like I do from several other positions.

Weatherford ("WFT") WFT's restructuring is on plan and the shares are responding, now up 60% since I first recommended them in February, 2013 at $13.25.

Macquarie Infrastructure Trust ("MIC") MIC reported earnings on May 1, and the shares gained 4.3%, closing at an all-time high of $59.98. Even at the new record close, the yield is 6.25%, as the company raised the payout again.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from April 30.

This chart shows all PCM's recommendations for the past 34 months showing an average return of +43.8%.
The total return on the S&P 500 from July 2, 2011 through April 30, 2014 was approximately +45.5%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
4/2/14	Questcor	QCOR	Buy	$68.00	$82.18	21.3%
4/2/14	SodaStream	SODA	Buy	$43.50	$42.53	-2.2%
3/5/14	Whistler Holdings	WSBHF	Buy	$14.20	$15.05	6.0%
1/8/14	ChipMOS	IMOS	Buy	$19.00	$21.04	10.7%
12/5/13	Sealed Air	SEE	Buy	$31.50	$34.31	9.7%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$21.19	20.1%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$53.12	25.4%
10/2/13	JP Morgan	JPM	Buy	$52.00	$55.98	9.8%
9/6/13	Owens-Illinois	OI	Buy	$29.25	$31.78	8.6%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$51.88	23.9%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$57.52	12.5%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$21.04	64.2%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$55.18	15.8%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$22.71	25.5%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$21.00	58.5%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$24.50	28.8%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$13.51	7.2%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$52.58	81.7%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$21.04	85.4%
7/3/12	SeaDrill**	SDRL	Buy	$37.50	$35.60	11.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$13.51	47.7%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$89.76	78.6%
3/6/12	du Pont	DD	Buy	$50.50	$67.32	39.4%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$55.41	109.8%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$57.52	129.9%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$13.51	79.4%
10/3/11	Apple	AAPL	Buy	$350.00	$590.09	75.2%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$13.51	44.0%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill**	SDRL	Buy	$35.73	$35.60	26.3%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$13.51	20.7%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

There is no recommended stock for May

Please don't hesitate to contact me with questions or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

April 2, 2014

Range of Returns	March	YTD

All PCM Accounts	(0.2%) - 2.0%	(0.2%) - 3.9%
S&P 500	0.7%	1.3%

March: A volatile month

March began with the "Ukraine selloff" and the S&P 500 even went negative for the year mid month. However, dovish comments from Janet Yellen on the 31st sparked a rally and the first quarter closed in positive territory. The most notable action to me was that growth/momentum stocks, as exemplified by the biotech index, have begun underperforming value stocks. As far as Peattie Capital accounts go, the best performers year to date are those that emphasize value names, and the weaker accounts so far are those that are geared for growth.

Two big winners which reflect this change in market sentiment were Seagate Technologies ("STX") and Wells Fargo, ("WFC"), both of which trade well below the market's 16x (forward) multiple and each gained over 7% in March. On the other hand, a few growth-oriented accounts own names like Epam ("EPAM") and ChipMos ("IMOS") which were both weak. I am much more interested in individual stock selection than style boxes, but I noted a Morgan Stanley comment on March 25th which said "The spread between the highest and lowest growth quintile of the S&P 500 for LT growth estimates is the widest it has ever been." It gets my attention when a spread is "as wide as its ever been."

When everyone believes something will happen, odds are it won't

The old adage about when everyone expects something to happen in the market it probably won't is coming true in two areas. I'm referring to the universal belief that interest rates were bound to rise with the onset of tapering, and also that equities were due for a pullback. I hereby plead guilty to subscribing to both those notions, neither of which has come true. The lesson to me is clear: outperformance relies on good stockpicking, rather than sharing a popular macro view of the world. Being part of the crowd might feel safer, but it will likely lead to mediocrity as far as I'm concerned.

That said, I still believe that eventually interest rates will rise, particularly at the longer end of the yield curve. In addition, I would be prefer to be buying stocks in an environment with more fear, which would result from a selloff. Nonetheless, I have been finding numerous opportunities and have initiated positions in several new names over the past month or so.

I hate to sound like a broken record, but.....

For me the key issues driving equities remain the enormous liquidity in the system, the lack of attractive alternatives, the positively sloped yield curve, the reasonable (no longer cheap) multiples, the discrepancy between the yield on equities and the yield in bonds, the still skeptical retail investor, the continuing support of the Federal Reserve (highlighted by Yellen's March 31 speech in which she refocused attention on the weak US employment situation), and the institutionalization of hedge funds who are now emphasizing low volatility and "robust risk management" rather than excess returns.

My opinion regarding the US economy hasn't changed either; it continues to improve slowly but steadily. Recent data include the rising demand for bank loans, increasing consumer confidence, and the ISM manufacturing index, which has now had 10 consecutive months of improvement. Connecting all these dots suggests to me that now is a very good time to be an active manager in equities.

Brief comments on existing positions

duPont ("DD") DD remains among my favorite ideas as the company's remolding into a more growth oriented company is unfolding nicely. In addition, it is benefitting from having cut expenses during the downturn, and now has two tailwinds with an expanding economy and significantly lower input costs due to the booming production of natural gas liquids in the U.S.

Wells Fargo ("WFC") Historically WFC trades at 11-14x earnings, and even at $49 it is well below that peak. The steep yield curve is a boon for all banks, and WFC is Warren Buffett's biggest holding.

Apple ("AAPL") AAPL tends to trade well when there are new products approaching, which is the case today. Being able to use Microsoft's Office on an ipad won't hurt either. It's widely believed that AAPL will raise it's dividend too on the next earnings report.

DirecTV ("DTV") Dish merger or no Dish merger, DTV is a low multiple stock (11x estimates) with a large and growing user base. I particularly like the Latin America growth prospects with the World Cup and Summer Olympics looming.

Seagate ("STX") The market is acknowledging that there is a role for STX in the cloud.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from March 31.

This chart shows all PCM's recommendations for the past 33 months showing an average return of +47.0% .
The total return on the S&P 500 from July 2, 2011 through March 31, 2014 was approximately +44.9%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
3/5/14	Whistler Holdings	WSBHF	Buy	$14.20	$13.70	-3.5%
1/8/14	ChipMOS	IMOS	Buy	$19.00	$22.06	16.1%
12/5/13	Sealed Air	SEE	Buy	$31.50	$32.87	5.2%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$27.08	53.04%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$54.56	28.8%
10/2/13	JP Morgan	JPM	Buy	$52.00	$60.71	18.2%
9/6/13	Owens-Illinois	OI	Buy	$29.25	$33.81	15.6%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$51.00	21.9%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$57.30	12.1%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$22.06	72.1%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$53.81	13.1%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$22.83	26.1%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$17.36	31.0%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$23.77	25.1%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$13.16	4.4%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$56.16	93.7%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$22.06	94.3%
7/3/12	SeaDrill**	SDRL	Buy	$37.50	$35.60	11.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$13.16	43.8%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$90.96	81.0%
3/6/12	du Pont	DD	Buy	$50.50	$67.10	39.0%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$54.13	105.3%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$57.30	128.3%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$13.16	74.8%
10/3/11	Apple	AAPL	Buy	$350.00	$536.74	60.0%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$13.16	40.3%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill**	SDRL	Buy	$35.73	$35.60	26.3%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$13.16	17.6%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

Recommended stocks: SodaStream International Ltd. ("SODA") and Questcor ("QCOR")

SodaStream International, LTD ("SODA") dropped from $75 last summer to ~$38 early this year, after a mildly disappointing fourth quarter. In addition, Coca-Cola's ("KO") recent announcement of a partnership with Keurig Green Mountain to produce a home soda product sparked competitive concerns, contributing to the sell off as well. I think the market has overreacted, and SODA is a compelling buy at current levels.

In the Q4 earnings release, SODA attributed its 67% drop in operating income primarily to discounting and promotions. However revenues grew 26% in the quarter, and for the year revenues grew 29% to $562mm. For 2014, SODA has guided to revenue growth of 15%, and EBITDA growth of 25% (excluding foreign exchange effects). SODA is profitable, and serves a large and growing global market.

At its May, 2013 analyst presentation, SODA stated it has only a 0.2% market share of the 220 billion liter carbonated soft drinks market, and a 2% share of the 31 billion liter sparkling water market. Having introduced the world's first home soda machine in 1995, SODA is now available in 45 countries, 60,000 retail outlets, and has sold seven million units (4.4 million in 2013 alone). I like the "razor and razor blade" model as users have to replenish empty carbonators, which grew at 30% in 2013.

According to data published by Beverage Digest on March 31, the decade-long decline in U.S. carbonated soft drinks accelerated in 2013. This bodes well for SODA which supplies a healthy, convenient, and environmentally preferable alternative, and SODA has the first mover advantage in the home carbonated drinks market as well. The company's goal is to grow to $1bn in revenues in 2016, which I believe they will do if my (admittedly unscientific) survey of a few users is any indication. I recommend buying shares of SODA up to $43.50.

Questcor is a rapidly growing and very profitable drug development company which has a "pipeline in a drug", that drug is called Acthar. It has become a target of short sellers, who claim, among other things, that the CEO is improperly timing sales of shares (even though he has a 10(b)5 program in place) and that the drug isn't properly labelled. At the risk of oversimplifying, I am persuaded the shorts are wrong.

In 2013, QCOR reported revenue growth of 57% (to $502mm) and GAAP EPS growth of 52% (to $4.76). In addition, QCOR repurchased 960,000 shares in Q4 at an average price of $55.26, and still had 5.3mm shares remaining in the repurchase plan as of year end. QCOR pays a $1.20 annual dividend and generated $337mm in cash from operations in 2013, up from $219mm in 2012. The shares are still well below their all-time high of ~$80, and I recommend buying them up to $69.

Please don't hesitate to contact me with questions or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

March 5, 2014

Range of Returns	February	YTD

All PCM Accounts	2.6% - 5.1%	(0.6%) - 2.2%
S&P 500	4.3%	0.6%

A bounceback in February

A number of cyclical holdings performed very well in February, which suggests to me that the market believes the economic recovery is for real. ChipMOS (�IMOS�) bounced 20%, and has now gained 101% since I originally recommended it in August, 2012, 78% since I recommended it a second time last April, and 20% since I recommended it again in January (see table below). Along the way, IMOS has had corrections of 10%, 20% and 30%, enough to test anyone's conviction. However, one of my investing goals is to know portfolio companies well enough to know how to respond to such volatility.

Other cyclicals that performed well in February are Sealed Air ("SEE") which has now gained 8.5% since I recommended it in December, nearly triple the S&P 500's return, and Owens-Illinois ("OI") which has returned 16% since I recommended it in September vs. 12% for the S&P 500, using Feb. 28 closing prices.

One very weak performer was KVH Industries ("KVHI") which delivered an inline earnings report but mildly disappointing guidance for 2014, and the shares dropped nearly 10%. KVHI's game-changing marine satellite communications solution is growing slowly but steadily, and I remain excited about the company's prospects.

March begins with a "Shock to the System"

I'm delighted February was such a good month, but it almost seems irrelevant as March began with the "Ukraine selloff." These can (and do) happen anytime, and anyone with a longer-term perspective ought to welcome them. They are a healthy and necessary part of the investment landscape which clean out the froth, create a "wall of worry," and provide opportunistic buying points. Here's how the market has behaved in the face of a few such shocks, provided by S&P Capital IQ:

The Flash Crash (5/6/10), the Reagan Shooting (3/30/81), the Kennedy Assassination (11/22/63), and the Cuban Missile Crisis (10/2/62) each bottomed one day after the event, at levels 2% - 4% below where the market was trading beforehand. The Iraq Invasion of Kuwait (8/2/90) bottomed two days later with a drop of 5.9%.

Some longer duration shocks include the Lehman Bankruptcy (9/15/08) which bottomed 121 days later with a drop of 46%, the Nixon Resignation (8/8/74) which bottomed 39 days later with a drop of 24.6%, and Pearl Harbor (12/7/41) which bottomed 18 days later with a drop of 10.8%.

The market seems to recover reasonably quickly unless the macro environment has some unaddressed issue such as the onset of inflation (Nixon) or deleveraging (Lehman). Excluding that kind of systemic issue, the market recovers its losses in a matter of days according to the S&P Capital data. In this case, the market reclaimed its previous high one day later, which suggests to me the market doesn't view this as a serious threat.

Still a Rodney Dangerfield market

Overall I remain very optimistic about equities, particularly mid and longer term. Part of my optimism results from the fear that many investors still have regarding equities. To me, that is one component of the bullish thesis, and over time I expect more investors to increase their equity exposure. Two major collapses in a relatively short period have scared away many potential investors, if my conversations are an indication.

More importantly, liquidity remains ample, valuations are still acceptable (especially in this ultra-low rate environment), other investment choices are unappealing, earnings growth continues, corporate balance sheets are in excellent shape, and economic data, broadly speaking, are trending in the right direction. Even as the market dropped Monday, reports such as personal income, consumer spending, construction spending and manufacturing data all beat estimates.

What are the concerns?

I don't mean to be pollyannaish, so here are a few items that could be construed as warnings: Margin debt has grown over 20% in the past year to $450bn, well above 2007's peak of $381bn (source: Financial Times, 3/3/14). In addition, some ratios are extended: the S&P 500 trades at 17x trailing earnings, and the Russell 2000 at 20.9x, both of which I consider expensive, but not prohibitively so.

Other examples: the price to (trailing) sales ratio is currently 1.66x vs. a post-1980 mean of 1.06x, the value of the Wilshire 5000 of $19.6 trillion is 115% of GDP vs. a post-1980 average of 76%, and the Shiller cyclically-adjusted price-earnings ratio is 24.5x vs. the post WWII average of 18.4x. (Source: Grant's Interest Rate Observer, 2/21/14).

My conclusion is that while there are fewer glaring bargains and no doubt the market is not as cheap as it was, the weight of the evidence is still on the bullish side. I have mentioned several times recently that the market is due for a pullback, which I would welcome and view as a buying opportunity based on what I know today.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from February 28.

This chart shows all PCM's recommendations for the past 32 months showing an average return of +46.2% .
The total return on the S&P 500 from July 2, 2011 through February 28, 2014 was approximately +43.7%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
1/8/14	ChipMOS	IMOS	Buy	$19.00	$22.80	20.0%
12/5/13	Sealed Air	SEE	Buy	$31.50	$34.04	8.5%%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$25.85	46.5%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$52.93	24.4%
10/2/13	JP Morgan	JPM	Buy	$52.00	$56.82	10.7%
9/6/13	Owens-Illinois	OI	Buy	$29.25	$33.92	16.0%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$53.20	25.3%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$54.18	4.5%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$22.80	77.8%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$55.53	16.5%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$24.14	33.4%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$16.67	25.8%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$23.69	23.5%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$12.93	2.6%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$52.19	80.4%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$22.80	100.7%
7/3/12	SeaDrill	SDRL	Buy	$37.50	$36.96	12.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$12.93	41.3%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$95.17	89.4%
3/6/12	du Pont	DD	Buy	$50.50	$66.62	37.1%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$55.00	108.3%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$54.18	113.7%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$12.93	71.7%
10/3/11	Apple	AAPL	Buy	$350.00	$526.54	57.0%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$12.93	37.8%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill	SDRL	Buy	$35.73	$36.96	27.4%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$19.93	15.5%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

Recommended stock: Whistler Blackcomb Holdings (TSE:WB OTC:WSBHF)

Whistler Blackcomb is an independent Canadian company that operates the Whistler Blackcomb ski resort outside Vancouver, British Columbia. It offers a very stable business model in an industry with high barriers to entry, and trades at an alluring discount to its closest publicly-traded competitor Vail Resorts ("MTN"). The 6.9% yield makes it an attractive candidate for income accounts, and I think it has a good chance to provide capital appreciation as well.

WB spent heavily, along with local government, to update facilities (particularly access) prior to the 2010 Olympics, and driving time to the resort from Vancouver is now less than two hours. It averages 39 feet of snowfall per year, and typically the season runs from mid-November through May. In the 2011-2012 ski season, in which MTN experienced a 50% drop in snowfall across its resorts (mostly in Colorado and Utah) and the U.S. experienced a drop of 16% in total ski visits, WB had over 45 feet of snow and a 5% increase in visits.

WB came public in November, 2010 at $12 and drifted down to $9.50 in late 2011. Subsequently the shares rallied to ~$15, but recently dropped back to about $14. At these levels, it trades at roughly 9x 2014 estimated EBITDA and 13x free cash flow, which compares favorably to MTN's 11.5x and 20x, respectively. While attendance growth is flat to up very slightly, pricing power is significant, and spending per visitor is rising too. I think the risk/reward for WB is very good near $14 and I recommend buying it up to $14.20.

Please don't hesitate to contact me with questions or comments and please let me know if you'd like to be removed from distribution.

CLOSE THIS ISSUE

February 5, 2014

Range of Returns	January	YTD

All PCM Accounts	(3.8%) - (1.8%)	(3.8%) - (1.8%)
S&P 500	(3.6%)	(3.6%)

2014 is not going to be like 2013

2013 ended with sentiment off the charts, at levels that have coincided with short-term peaks in the past. So it's really no surprise that the markets started the year with some volatility. Then weakness out of China and global currency upheavals hit later in the month triggering heavy selling in emerging markets. Peattie Capital clients own a number of positions with operations in the emerging markets, one of which dropped nearly 25%.

On the plus side, I think the market is long overdue for a correction, so I view January's activity as a necessary and healthy part of the investment process. Near term I expect more weakness, and I have been raising modest amounts of cash in most accounts. However, some of my favorite ideas are at or near very attractive entry levels, and I expect to be adding to them at some point. Furthermore, I believe the framework is still in place for 2014 to be another good year. Beyond pruning and raising a little cash as a defensive measure, I am not taking any significant actions so far.

While I will never claim it's been a good month when accounts are down, I take some solace that most portfolios performed better than the markets.

Royal Caribbean rocks, and Make My Trip rockets

In the meantime, I am pleased that the average return for Peattie Capital's recommended stocks is still ahead of the S&P's total return over the past 31 months (see table below) and I remain optimistic about their prospects. In addition, several recommended stocks have been big winners: Royal Caribbean ("RCL") reported better than expected pricing trends which drove the shares to $49, a gain of 16% since its November recommendation. The biggest performer has been Make My Trip ("MMYT") which rocketed from its $17.65 recommended price in December to $27.55, a gain of 57% in two months.

Peattie Capital's two biggest positions are both up between 1.5% and 2% on the year, compared to losses of 7.3% in the Dow and 5.8% in the S&P 500 (using Feb. 3 closing prices). I am hopeful that correlations between stocks will continue to fade so that the value of good stock picking will become increasingly clear.

Expecting more selling in the near term, but still optimistic for 2014 and beyond

Overall, I think conditions are still good for equities, particularly US equities. However, in the near term there are headwinds. For one, the aforementioned sentiment indicators are better, but still haven't reached levels that have led to buying in the past. From a technical perspective, volume has been heavier on down days, which is mildly concerning. In addition, even with this 6% (ish) correction so far, some fear indicators are quiet, (such as the put/call ratio) which surprises me. So on balance I don't think the selling is over.

More important, however, are the fundamentals, and they remain very favorable: the US economy is growing slowly but steadily, there are no major signs of inflation at the moment (in fact there has been more deflation chatter recently), the yield curve remains positive, (albeit flatter than it was), corporations are flush with cash (particularly banks), some recent economic data have been mildly disappointing (car sales e.g.), but that may be attributable to massive storms (in my opinion), equity valuations relative to bonds are very attractive (does anyone want to buy the 10-year note at 2.6%?), and credit spreads remain fairly tight, signifying that the markets don't see an imminent recession or systemic threat to the economy.

When will we know when it's over?

There's really no telling how long a correction will endure or how deep it will be. Two short ones lasted about a month: from November 7, 1974 - December 6, 1974 the market dropped 13.6%, and from October 5, 1979 - November 7, 1979 it dropped 10.2% (source: David Rosenberg, January 7, 2014). More recently, the market corrected 16.0% from April 20, 2010 - July 2, 2010 and from April 29, 2011 - October 3, 2011 it dropped 19.2%. From a duration standpoint, the market corrected 19.4% from Sept. 21, 1976 - March 6, 1978, a span of 531 days (source: IBID).

As I've said, I think the fundamentals today are good, and so my guess would be this correction will be on the milder side, emphasis on the word GUESS. Some of the signposts that I will be looking for are a rise in the daily put/call ratio to the 1.2 area (or several days above 1.1), a drop in the bullish reading of the AAII survey to something below 40 (it went from 37.1 as Labor Day last year to 61.6 at year end), or the S&P 500 to drop to ~1700, which is where there is support by way of the 200 day moving average.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from January 31.

This chart shows all PCM's recommendations for the past 31 months showing an average return of +42.0% .
The total return on the S&P 500 from July 2, 2011 through January 31, 2014 was approximately +39.4%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
1/8/14	ChipMOS	IMOS	Buy	$19.00	$18.96	-0.2%
12/5/13	Sealed Air	SEE	Buy	$31.50	$31.05	-0.5%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$27.75	57.2%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$49.60	16.6%
10/2/13	JP Morgan	JPM	Buy	$52.00	$55.36	7.9%
9/6/13	Owens-Illinois	OI	Buy	$29.25	$32.04	9.5%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$49.74	17.4%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$55.26	6.6%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$18.96	48.1%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$55.51	14.7%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$24.11	33.2%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$13.54	2.2%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$21.96	14.8%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$13.18	4.6%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$52.86	81.2%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$18.96	67.3%
7/3/12	SeaDrill	SDRL	Buy	$37.50	$35.71	9.3%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$13.18	44.0%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$92.75	84.6%
3/6/12	du Pont	DD	Buy	$50.50	$61.01	26.0%
2/9/12	Credicorp**	BAP	Buy	$119.00	$133.17	16.0%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$55.03	106.6%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$55.26	117.6%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$13.18	75.0%
10/3/11	Apple	AAPL	Buy	$350.00	$500.60	47.9%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$13.18	40.5%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill	SDRL	Buy	$35.73	$35.71	23.9%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$13.18	17.8%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

Good luck, Janet!

When Paul Volker took over as Chairman of the Federal Reserve in 1979 he was immediately tested by the Iranian hostage crisis and the subsequent oil price spike. Alan Greenspan, who took over in 1987, was greeted with Black Monday, a 22% drop in October, 1987, just two months after he was at the helm. Ben Bernanke? Not much, just the biggest global credit bust in history, but at least he had a year before it really unfolded. Good luck, Janet!

Please don't hesitate to contact me with questions or comments and please let me know if you'd like to be removed from distribution.

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January 8, 2014

Range of Returns	December	YTD

All PCM Accounts	2.1% - 4.5%	24.3% - 32.8%
S&P 500	2.3%	29.6%

December: a big month to cap off a big year

December was an outstanding month for Peattie Capital portfolios, as most accounts handily outperformed the S&P's 2.3% gain. December's recommended stocks, Sealed Air ("SEE") and Make My Trip ("MMYT") each gained ~9% and were the best performers.

However several Peattie Capital recommended stocks declined, leading to a drop in their average return for the month. Nonetheless, the average return for the recommended stocks is still ahead of the S&P's total return over the past 30 months (see table below) and I remain optimistic about their prospects.

For the year, most portfolios returned in the mid to high 20%s range, with several over 30% on a net basis. As I mentioned previously, the hardest part of 2013 was staying invested, as there were a number of scary headlines. Peattie Capital's investment process of focusing primarily on individual stock selection but also remaining flexible and opportunistic and having an opinion about the overall environment led to excellent returns this year.

I officially grade myself an "A" (down from "A+" last year) on the strength of my accurate macro call to lighten up/shorten duration on bonds and to overweight equities, particularly US equities. The reason it is not "A+" again is that several core holdings peaked early in the year and have subsequently gone sideways, with the result that they did not keep pace with the market's surge. As these names are widely held and are significant weightings in many portfolios, overall returns have been held back somewhat. NOTE: for anyone interested, the past few years' newsletters are posted on my website, www.peattiecapital.com, under the newsletters tab.

Still optimistic for 2014

Broadly speaking global economies are improving, and yet central banks remain accomodative. This provides a very friendly backdrop for equities, and I expect 2014 to be another good year. My guess is that this year will be more difficult though, as historically mid term election years tend to be more volatile. According to a recent interview with Sam Stovall, (head of S&P research) the two weakest quarters of the presidential cycle are Q2 and Q3 of the midterm election year. A little volatility would be a good thing, as far as I'm concerned, because it would take some of the froth out of the market and would provide better entry points for names I'd like to own.

By definition, I don't know what this year's surprises will be, but broadly speaking I think the environment is favorable. The most bullish earnings estimate I've seen is for S&P operating earnings to reach $122 (Don Hays: "How High is High?" 12/16/13). Using say, a 17x multiple (reasonable given the low interest rate environment) generates an S&P of 500 2074, or a return over 12% excluding dividends and over 14% including them. With a payout ratio of only 35%, corporations are loaded with cash, and so there is plenty of room for dividend increases, stock buybacks, capital expenditures, M&A, and hiring, all of which I would expect to be incrementally positive.

According to Goldman, Sachs, nominal GDP is up 73% and S&P 500 earnings have nearly doubled over the past 13 years, yet the S&P 500 has only risen 18%. And Morningstar reported that through October, investors had put $111 billion into stock mutual funds and ETFs, which is less than they took out from 2009 to 2012. For perspective, investors put $471 billion into US stock funds in the four years leading up to the 2000 peak.

Finally, while I don't consider myself a technician, it's hard not to notice that the S&P broke out of a very long trading range earlier in 2013.

Potential yellow flags

Leaving aside the unknowable, such as an exogenous event, from a near-term perspective I think optimism is too high, as bulls (61.6%) far outnumbered bears (15.2%) in the most recent Investor's Intelligence poll and the VIX hasn't been above 20 since October (source: Richard Russell Jan. 6 2014).

Another issue to watch in 2014 would be a surprise rise in interest rates and the potential pressure on the market's multiple which has been steadily expanding the past few years. In early 1994 rates backed up very quickly, much more so than the market had been anticipating, and there are parallels between then and today. For example, in both cases the Fed had been in lengthy easing cycles, and there was a notoriously slow recovery unfolding.

None of this is to say that a correction will happen, only that history provides some lessons. Based on what I know today, I would expect any near term correction to be a buying opportunity.

January is a tricky month because there are so many cross currents at work in the markets, so I don't read anything into the weakest start since 2005 (and 2013 was the best market since 1997). Still, the market tends to follow January's lead (even better is when both January and February are both positive), so on balance I would prefer to see the market start the year with a positive return.

Stock picking continues to shine

Here is an updated version of recent Peattie Capital recommended stocks, using closing prices from December 31.

This chart shows all PCM's recommendations for the past 30 months showing an average return of +44.3% .
The total return on the S&P 500 from July 2, 2011 through December 31, 2013 was approximately +43.0%.

Additional recommendations are available on request. This table does not include speculative
and short sale candidates which are only appropriate for clients who have requested them.

PERFORMANCE OF PCM RECOMMENDED STOCKS

Date	Name	Ticker	Action	Price	Close	Gain
12/5/13	Sealed Air	SEE	Buy	$31.50	$34.05	8.5%
12/5/13	Make My Trip	MMYT	Buy	$17.65	$19.26	9.1%
11/5/13	Royal Caribbean	RCL	Buy	$42.75	$47.42	10.9%
10/2/13	JP Morgan	JPM	Buy	$52.00	$58.48	13.2%
9/6/13	Owens-Illinois	OI	Buy	$29.25	$35.78	22.3%
8/3/13	Cedar Fair, L.P.	FUN	Buy	$43.50	$49.58	17.0%
6/5/13	Macquarie Infra.	MIC	Buy	$53.50	$54.43	5.0%
4/2/13	ChipMOS	IMOS	Buy	$12.90	$19.24	50.2%
4/2/13	Energy Transfer Partners	ETP	Buy	$50.75	$57.25	18.1%
3/4/13	Kohlberg, Kravis, Roberts	KKR	Buy	$18.10	$24.34	34.5%
2/3/13	Weatherford Int.	WFT	Buy	$13.25	$15.49	16.9%
1/6/13	Tronox Limited	TROX	Buy	$20.00	$23.07	20.4%
12/3/12	KVH Industries	KVHI	Buy	$12.60	$13.03	3.4%
12/3/12	Telular*	WRLS	Buy	$10.06	$12.74	28.6%
10/3/12	Seagate Technology	STX	Buy	$30.00	$56.16	92.2%
9/4/12	Arcos Dorados**	ARCO	Buy	$13.25	$11.92	-7.8%
8/4/12	ChipMOS	IMOS	Buy	$11.50	$19.24	69.7%
7/3/12	SeaDrill	SDRL	Buy	$37.50	$41.08	23.6%
6/6/12	Mako Surgical*	MAKO	Buy	$23.25	$29.53	27.0%
5/4/12	KVH Ind.	KVHI	Buy	$9.15	$13.03	42.4%
4/6/12	SBA Com.	SBAC	Buy	$50.25	$89.84	78.8%
3/6/12	du Pont	DD	Buy	$50.50	$64.97	33.9%
2/9/12	Credicorp	BAP	Buy	$119.00	$132.73	15.7%
1/12/12	Genesis Energy	GEL	Buy	$28.50	$52.57	97.9%
12/2/11	Telular*	WRLS	Buy	$6.96	$12.74	91.2%
11/6/11	Carters**	CRI	Buy	$36.00	$71.56	99.7%
11/6/11	Family Dollar**	FDO	Buy	$58.00	$69.28	22.1%
11/6/11	Macquarie Infra.	MIC	Buy	$27.71	$54.43	114.6%
10/3/11	KVH Ind.	KVHI	Hold	$7.53	$13.03	73.0%
10/3/11	Apple	AAPL	Buy	$350.00	$561.02	65.2%
10/3/11	Family Dollar**	FDO	Buy	$50.86	$69.28	39.2%
8/6/11	Carters**	CRI	Buy	$29.99	$71.56	139.7%
8/6/11	KVH Ind.	KVHI	Hold	$9.38	$13.03	38.9%
7/2/11	Telular*	WRLS	Buy	$6.06	$12.74	123.1%
7/2/11	SeaDrill	SDRL	Buy	$35.73	$41.08	38.9%
7/2/11	KVH Ind.	KVHI	Hold	$11.19	$13.03	16.4%

NOTES: Gains include dividends. All numbers are unaudited. The risk of loss always exists, and past results are not necessarily indicative of future results. * Company acquired, position closed. ** Position closed at manager's discretion

Recommended Stocks: ChipMos ("IMOS")

This is the third time I've recommended IMOS-previously in August, 2012 at $11.50 and subsequently in April, 2013 at $12.90. I am recommending it again on the heels of Micron Technology's ("MU") strong earnings report yesterday (shares are +12% today), as MU is IMOS's largest customer. Additionally, IMOS has succeeded in paying down debt so that they are now net cash positive, and they have also applied for, and received, permission to list their Taiwan subsidiary on the local exchange.

This is a small cap and highly cyclical name, and so it may not be suitable for every account. However, with growing end markets, increasing outsourcing by manufacturers, and consolidation in their industry, I think IMOS is well positioned for further growth. In December, IMOS shares dropped ~15%, and I recommend buying them up to $19.

Please don't hesitate to contact me with question or comments and please let me know if you'd like to be removed from distribution.

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