Portfolio manager’s Letter January 2007
2006 Investment year results – average account up 16.9%
2006 Investment year results for Losch Management Company – average account was up 16.9%, this was almost exactly 3% better than the Wilshire 5000 index average account was up 16.9%, this was almost exactly 1.3% better than the S&P 500 index, and 7.5% better than the NASDAQ Composite, an acceptable but not great investment result. Considering that Losch Management Company spent the year with a very low risk profile (massively overweight Berkshire Hathaway, and 20% to 30% in cash most of the time) 16.9% looks even better.
This investment result is a composite of all Losch Management Company accounts and was not size weighted, which means the the biggest accounts did a little worse than the average, and most of the small accounts did better. The large accounts tend to lag this composite because of Tax considerations and because they tend to be managed more conservatively.
2006 Investment year results – Composite Return
Composite Returns From 12/31/2005 to 12/31/2006
| Losch Management Composite Return by Quarter | Cumulative Return Losch Management | Quarter Ending | Return of Wilshire 5000 Index | Cumulative Return Wilshire Index |
| 1.21% | 1.21% | 03/31/2006 | 5.09% | 5.09% |
| 1.71% | 2.95% | 06/30/2006 | -2.33% | 2.65% |
| 3.47% | 6.51% | 09/30/2006 | 3.87% | 6.62% |
| 9.76% | 16.91% | 12/31/2006 | 6.83% | 13.90% |
So far, our prediction for the end of the bull market has been premature, but no bull market lasts forever, and with this one entering year number four we will remain cautious. Losch Management Company continue to believe that there is a world wide credit bubble which has left investors with more cash to invest than there are profitable uses for that cash. This has thrown the risk-return ratio out of whack and makes cash a more attractive holding than usual. This condition will correct itself, and probably sooner rather than later.
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