June in Review
For Professional Use Only
(All Performance as of June 30, 2004)
Small Cap Core Strategy
June: +1.24%
Y-T-D: +6.0 7%
One Year: +38.84%
3-Year: +10.72% (annualized)
5-Year: +19.77% (annualized)
Since Inception +20.02% (annualized, 12/31/1998)
Small Cap Core Strategy had another positive month in June posting a 1.24% return. It did not match the strong returns of the benchmark Russell 2000 Index which, on the strength of the rally in Basic Materials and Energy Sectors, returned 4.21%. New to the portfolio this month is AirTran Holdings (AAI), Chiquita Brands (CHB) and Catalina Marketing (POS).
Chiquita Brands (CQB) operates as an international marketer, producer and distributor of bananas and other fresh produce. The Company plans on leveraging its strong brand name to other related value-added products such as fresh-cut fruit. In addition, tariff reform in Europe will lower the cost of bananas, increasing demand in Chiquita?s largest market. The stock sold off sharply when the company voluntarily disclosed that it had made payments to protect its Colombia employees. While this is a serious matter, we believe that the company has dealt with it quickly and appropriately and has announced the sale of its Columbia subsidiary. After meeting with management, getting comfortable with their actions and long-term goals, we were impressed enough to add it to the portfolio.
Small Cap Value Strategy
June: +4.25%
Y-T-D: +7.96%
One Year: +39.09%
3 Year: +3.76% (annualized)
5-Year: +15.89% (annualized)
Since Inception: +18.66% (annualized, 3/1/1999)
Ironwood Capital Management?s Small Cap Value Strategy rebounded strongly this month up 4.25%, although not enough to keep up with the benchmark Russell 2000 Value Index which returned 5.08%. It was an active month for this strategy with two new positions ? Investment Technology Group (ITG) and Interstate Bakeries (IBC)- along with two positions eliminated ? Southwestern Energy (SWN) and Graphics Packaging (GPK).
ITG provides equity trading services and transaction research to institutional investors and brokers around the world. As a client of ITG, we think it has a great product, has $6.00 per share in cash and with a P/E of 8X forward earnings has a substantial up-side potential. We feel they will continue to improve profitability by rolling out new trading products to their institutional customers. The company?s insiders are buying shares at this level and, in a consolidating industry, may be a good takeover play.
We view Interstate Bakeries as an attractive turnaround situation. They are the largest wholesale baker and distributor of fresh baked breads in the US with great brand names (Hostess, Wonder Bread) and a new premium brand, Baker?s Inn. With management?s aggressive cost cutting and new product /marketing initiatives, we see great potential to increased profitability over its large $3.5 billion revenue stream. Interstate is also in a consolidating industry and we consider it a good defensive holding in a rising interest rate environment.
If you agree with our approach to researching, analyzing, and determining appropriate valuations of small cap companies and would like to learn more about Ironwood Capital Management?s small cap separately managed strategies, please call:
David Eaton
Ironwood Capital Management
21 Custom House Street, Suite 240
Boston, MA 02110
617-757-7626
deaton@ironwoodcapitalmanagement.com
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