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Columbia Management Fourth Quarter Letter with Comments on SWK, AGCO, CE, MCP, VRTX, DOLE, F, HAS, AIA
Posted by: Holly LaFon (IP Logged)
Date: April 10, 2012 10:24AM

Columbia Management had an up fourth quarter but a down year. Of its outlook for 2012, the fund says, "Given the significant pessimism and known risks, we feel that any improvement in outlook could spark a rally." In their fourth quarter letter below, they discuss the market circumstances that shaped 2011 and comment on their stock holding winners and losers:

Fund performance Class A shares of Columbia Value and Restructuring Fund returned 13.44% (excluding sales charge) for the fourth quarter. The fund outperformed its benchmarks, the Russell 1000 Value Index, which returned 13.11% and the Standard & Poor’s 500 Index (S&P 500 Index), which returned 11.82% during the period. Year to date, the fund declined 11.02%, underperforming both the Russell 1000 Value Index and the S&P 500 Index, which returned 0.39% and 2.11% respectively. For up-to-date performance information, please check online at

Market overview

December ended with a whimper, as the S&P 500 closed at the same level it started the year, rewarding investors with nothing more than the dividend yield. While fourth-quarter performance of the fund was good, it was not enough to offset the first nine months of the year. Perhaps the best news of 2011 was that the market did not go down.

The market fluctuations in 2011 convinced investors that it was an awful year, despite being flat by year end. Precipitous declines followed by upswings were almost all driven by near-term panic regarding bank and sovereign liquidity. To the extent that the European Central Bank and U.S. Central Bank have allayed those fears with recent pushes to expand their lending, the market is likely to revalue to a higher multiple, as valuations ultimately reflect longer term fundamentals.

Contributors and detractors

The fourth quarter saw a rebound in housing, transport and agriculture, as positive U.S. economic data offset some of the global concerns around Europe and China. Stanley Black & Decker (SWK), tied to housing through its tools and security divisions, was up. Celanese (CE) also rose on the back of higher expected earnings in their core chemicals business and accelerated growth in their ethanol production plans. Union Pacific was up, as it continued to show positive year-over-year volumes and pricing in rail and AGCO (AGCO) rose, as strong demand for agricultural farm equipment boosted sales.

Underperforming stocks were fairly eclectic and largely tied to singular issues. Molycorp (MCP), a producer of rare earth metals, fell, as prices for their products declined from earlier peaks. Vertex Pharmaceuticals (VRTX) was down, after sales growth failed to meet analyst expectations. Dole Food (DOLE) struggled with weak pricing and was down for the quarter.

The fund eliminated Ford Motor (F), Bombardier, Hasbro (HAS), and AIA Group (AIA). Ford and AIA both provided excellent returns on investment, but we were concerned that additional upside was limited. Bombardier, while making progress on growth initiatives in their aerospace division, was not meeting our targets quickly enough.


Given the significant pessimism and known risks, we feel that any improvement in outlook could spark a rally. The three main issues confronting stocks are sovereign debt in the European Union (EU), domestic politics in the United States and earnings expectations for corporations. Consensus views are for a bad first half followed by a good second half, but it would not surprise us if a market upturn comes early.

A resolution of EU issues in 2012 would significantly help the market and provide a large boost to industrials and commodities. Despite their many obvious differences, all 17 European nations share a common goal of making the system work. The U.S. political system also continues to grind its way to an election. Right now, the uncertainty in regulations and future tax/spending expectations is taking a large toll on corporate investment decisions. Any ultimate clarification would be beneficial. We expect a strong stock market recovery should Republicans sweep in November.

Lackluster earnings are the forecast for 2012. While this puts a damper on excitement, the low valuation of the market might be enough to initiate a rally by itself. With developed-market interest rates globally nearing zero, housing still recovering and bond yields quite low, equities have become the de facto cheapest asset class.

Investors should consider the investment objectives, risks, charges and expenses of a mutual fund carefully before investing. For a free prospectus, which contains this and other important information about the funds, visit The prospectus should be read carefully before investing.
Columbia Funds are distributed by Columbia Management Investment Distributors, Inc., member FINRA and managed by Columbia Management Investment Advisers, LLC.
The views expressed are as of the date given, may change as market or other conditions change, and may differ from views expressed by other Columbia Management Investment Advisers, LLC (CMIA) associates or affiliates. Actual investments or investment decisions made by CMIA and its affiliates, whether for its own account or on behalf of clients, will not necessarily reflect the views expressed. This information is not intended to provide investment advice and does not account for individual investor circumstances. Investment decisions should always be made based on an investor's specific financial needs, objectives, goals, time horizon, and risk tolerance. Asset classes described may not be suitable for all investors. Past performance does not guarantee future results and no forecast should be considered a guarantee either. Since economic and market conditions change frequently, there can be no assurance that the trends described here will continue or that any forecasts are accurate.
Additional performance information: All results shown assume reinvestment of distributions and do not reflect the deduction of taxes that a shareholder would pay on fund distributions or the redemption of fund shares.
The fund returns shown include the performance of Excelsior Value and Restructuring Fund, a series of Excelsior Funds, Inc. and the predecessor to the Fund, for periods prior to March 31, 2008.
1The returns shown for periods prior to the share class inception date (including returns since inception, which are since fund inception) include the returns of the fund’s oldest share class. These returns are adjusted to reflect any higher class-related operating expenses of the newer share classes, as applicable. Please visit for more information.
Gross expense ratio: Fund expense ratios are calculated based on the Fund's average net assets during the Fund's most recently completed fiscal year (or based on estimated amounts for funds that have been in existence less than one year), and have not been adjusted for current asset levels. If adjusted for any decrease or increase in assets, expense ratios would be higher or lower, respectively, than the numbers shown above. Please see the Fund's prospectus for additional details.
The Russell 1000 Value Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.
The Standard & Poor’s (S&P) 500 Index tracks the performance of 500 widely held, large-capitalization U.S. stocks.
It is not possible to invest directly in an index.

Guru Discussed: Columbia Management: Current Portfolio, Stock Picks
Stocks Discussed: SWK, AGCO, CE, MCP, VRTX, DOLE, F, HAS, AIA,
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