Content Provided by Matt Santini, CLS Portfolio Manager

For those of us who have spent any amount of meaningful time with a mask on, we know how important peripheral vision can be. If you are a skin diver, so much can be happening in your periphery, it can be at times unsettling. You might let your mind contemplate that big shadow out of sight. What about skiing? Ever get the feeling someone is right there as you cut fresh tracks in a crowded bowl? The brain is attempting to materialize what you can’t see.

This conundrum makes objective study impossible. There is no way to differentiate the visual detection of the eye from the neural processing of the brain. Luckily we can practice by becoming comfortable in our surroundings and our technique. Just look at jugglers, they have mastered an art form that relies on a solid grasp of their periphery.

Who else can potentially benefit from the mastery of their peripheral vision?  How about asset managers!  So much of what we accomplish can be attributed to being comfortable in that big ocean they call equities, or that big mountain range known as fixed income. It is always easy to buy straight ahead and follow the herd. But will that spear you the big fish, or get you up on the mogul podium? The best trades can be the ones on the periphery.

One perfect example is the recent surge in homebuilding stocks, and the corresponding ETF, ITB. That ETF was the best performing equity ETF of 2012, up a stunning 80 percent. While the herd was running to ITB, the peripheral trade, CUT, was left in the saw dust. CUT is the timber ETF. Everyone knows you can’t build a house without wood!  Timber is also a hard asset that occupies another hard asset (land). This means it may create value two ways: as a commodity and as a land sweetener. Hard or intrinsic assets tend to perform in inflationary environments. Timber stocks may yield more than home builders, have a lower beta, and are much more global in their reach. Even they have a solid grasp of their peripheral vision!

Peripheral-Chart

This information is prepared for general information only. It does not have regard to the specific investment objectives, financial situation and the particular needs of any specific person who may receive this report. You should seek financial advice regarding the appropriateness of investing in any security or investment strategy discussed or recommended in this report and should understand that statements regarding future prospects may not be realized. You should note that security values may fluctuate and that each security’s price or value may rise or fall. Accordingly, investors may receive back less than originally invested. Past performance is not a guide to future performance.

0490-CLS-2/22/2013