The Manager's Commentary - April 2011

In recent quarters, consumer staples stocks such as Johnson & Johnson (JNJ) have lagged the broad market, with economically sensitive areas such as resources and industrials driving index returns. JNJ’s strong Q1 earnings, however, reaffirmed the reason to hold such companies as long term wealth creators. JNJ’s per share income exceeded analyst expectations by 10 cents, driven by strong results in the pharmaceutical division, and the company also increased its dividend by for 49th consecutive year. On this news, JNJ shares gained nearly 11% during April.

Additionally we sold Ritchie Bros Auctioneers (RBA) in the Pender Balanced Fund and reduced the weight in the Pender Canadian Dividend Fund during April. While RBA’s business model remains one of our favorites, a 33% rally in the stock since early December had stretched it valuation to uncomfortable levels (30x earnings) compelling us to sell and reduce the position based on valuation. We fully expect to own RBA again in the future, but will wait for a more attractive price to re-enter the position.

Dixon Mitchell Investment Counsel
April 30, 2011