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Tweedy Browne Second Quarter Shareholder Letter

July 18, 2007

Buyout activity continued to buoy equity valuations during the quarter, both in the U.S. and abroad; however, debt originators began to face push back from investors who demanded more protection and better terms for the debt they were being offered.

The spread between junk bonds and treasury debt widened near the end of the quarter, which could dampen enthusiasm for a host of new debt offerings that are about to come to market. Should this trend continue, it could have significant ramifications for the pace of merger and acquisition activity, and ultimately for public equity market valuations.

Returns for the quarter were largely attributable to buyout activity in a number of our portfolio holdings and the residual impact of such activity on other companies in the portfolio; strong results in our Dutch holdings; unsustainably high returns in a number of our emerging market holdings; and continued solid results in our food, beverage, and financial holdings. Our pharmaceutical and other healthcare holdings, for the most part, performed poorly during the quarter, and our lack of energy exposure was once again a negative, as oil companies benefited from rising oil prices.

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Rating: 3.6/5 (8 votes)


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