From the Desk of Irwin Michael – June 26, 2015 The month of June has been characterized by unusual volatility. The Eurozone’s ongoing negotiations with Greece, the U.S. Federal Reserve’s interest rate intentions, commodity price variability, and China’s slipping economic growth overhang global securities markets. We expect greater clarity over the next several weeks. Nonetheless, we are pleased with the ABC Funds’ well positioned portfolios and our extensive pipeline of new ideas. Of note, over the past two months, we have been trimming the ABC REIT positions and as of this Friday, the ABC Funds have completely eliminated their REIT exposure. Moreover, we will be directing the proceeds into dividend paying common stocks with greater capital gains potential. This week, we would like to highlight three stocks in our ABC Funds’portfolios: Com Dev International is a manufacturer and distributor of space communications and space products. We have previously mentioned that there is immense unrecognized value in Com Dev due to its improving core business and majority-owned, high growth ExactEarth division. Furthermore, the company is free cash flowing, pays a 2.0% dividend, and has numerous catalysts, including ExactEarth’s strategic alliance with Harris Corporation. More importantly, on June 23rd, Com Dev announced that ExactEarth filed a preliminary prospectus for the IPO of its shares. We believe that this financing is highly material to the company and is the first step in unlocking Com Dev’s hidden value. Foot Locker is a global athletic retailer of footwear and apparel through its Foot Locker and Champs Sports retail stores. The company has a formidable balance sheet, dominant position in its market, and has immense free cash flow. Its business model generates enough cash flow to fund its attractive growth expansions, 1.5% dividend yield, and a significant share buyback. The company has seen strength in its common stock price due to a series of successful quarterly earnings results. Of note, NIKE Inc., a Foot Locker supplier, reported very strong earnings results on June 25th. We believe that Foot Locker should be a beneficiary of NIKE’s success. Overall, we are quite optimistic with regard to Foot Locker’s dominant market position and improving earnings trend. FLY Leasing is a lessor of commercial jet aircraft and other aviation assets to a diverse group of airlines around the world. We like the company’s attractive business and dividend model, providing a dividend yield of 6.3%. Furthermore, its improving business has been aided by stronger lease rates and a better economic environment. On June 22nd, FLY announced it entered into a transformational transaction to sell 33 aircraft for $985 million, a pretax gain of $35 million. This transaction decreases the average age of its fleet, provides $425 million in unrestricted cash to invest into newer aircraft, and reduces the company’s financial leverage. In summation, these corporate updates represent but a few of the positive news coming out of our ABC Funds’ holdings. The fact is that we remain optimistic on our ABC Funds’ portfolio selections and we look forward to improving second half 2015 performance. Irwin A. Michael, President I.A. Michael Investment Counsel Ltd.
