Despite the fact that the markets began the year in verifiably volatile fashion, they wrapped up the first quarter about where they began. Despite this however, our accounts successfully turned in significant gains for the quarter. This was due primarily to our two largest holdings: Amazon was up 19% and Oclaro was up 45% due to a buyout merger offer from Lumentum Holdings, a leading-edge fiber optic provider. The buyout offer of part cash and part Lumentum stock will likely be completed within a few months. We do not yet know the tax effects of this transaction.

The economy appears to be moving forward on firm footing. Although the current economic cycle is one of the longest on record, economic growth cycles normally don’t merely die of old age and recessions usually have specific causes. This growth cycle, with the recent tax cut and approval of the federal budget containing a sizeable deficit, now has these two additional growth stimuli to continue the expansion. Our economy has yet to explore the outer limits of an expanding workforce and capital plant utilization. When these limits on growth become more apparent, inflation and higher interest rates may become additional concerns for continued economic growth. Consequently, we will begin exploring investments in metals, basic materials and other inflation hedges for that possibility.

Having said all of that, many risks to growth remain in trade disruptions, from tariffs or other disruptions in existing trade agreements, currency exchange rates, rising interest rates, or possible military interventions or conflicts, among many other unforeseeable eventualities.

We remain cautious and vigilant. Prices are high and bargains are rare but we anticipate making account adjustments in response to economic conditions. Please also remember that because these quarterly thumbnail sketches are very brief, do not hesitate to call me if you wish to discuss your account or our outlook in greater detail.

Very Best Regards,

Joseph L. Toronto, CFA

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