The blog model portfolio generated a 1.4% return for Q2, 2011.

At the close of Q2, 2011 and after taking into account all commissions, fees and foreign dividend withholding taxes, the account was valued at $2,247,755. 

The blog model account generated top quartile performance in the 2nd quarter of 2011.    In absolute terms, the portfolio remained stuck at the #2 spot of 16 total funds in the representative peer sample. 

Leadership in the peer group changed slightly.  Harbor International (HAINX), a five star rated international blended fund, posted a 3% return in Q2.  For the year to date, the Harbor International Fund has returned 7.1%.    

The YTD return of HAINX  bested the blog model portfolio slightly.  In the first half of 2011, the blog model portfolio returned 7%.

Returns of the representative peer group for the quarter were as follows.

1.     TWWDX ($18.03).  1% in 2nd quarter. 

2.      ABIYX ($14.18).   0% in 2nd quarter. 

3.      DODGX (($113.62).  0% in 2nd quarter.

4.      DODFX ($36.78).  .4% in 2nd quarter.

5.      ANCFX ($38.71).  -.7% in 2nd  quarter.

6.      FCNTX ($70.61). -.5% in 2nd quarter. 

7.      BLUEX ($26.23).  -2.2% in 2nd quarter.

8.      UMBWX ($33.68).   1% in 2nd quarter. 

9.      TGVAX ($29.37).  .5% in 2nd quarter. 

10.   HAINX ($64.89).   3% in 2nd quarter. 

11.   CGMFX ($33.67).  -3.2% in 1st quarter. 

12.   OSMAX ($23.27).  .5% in 2nd quarter. 

13.    PRMSX (35.38).  -.4% in 2nd quarter.

14.    NTKLX ($41.81. .9% in 2nd quarter.

15.    SAHMX ($11.50). 0% in 1st quarter.  

Overall, the peer group sample closed out Q2, 2011 with an average return of .23%.

The Dow Jones Industrial Average, with a gain of .77% in Q2, was the only major North American index to post a gain during Q2, 2011.  

The Nasdaq posted a second quarter loss of  -.27%.

The Nikkei posted a second quarter gain of  1.2%.

The FTSE posted a second quarter return of .6%.

The S&P 500 posted a second quarter return of -.4%.

The Dow Jones Industrial Average posted a second quarter return of .77%.

The TSX composite index posted a second quarter loss of  -5.8%.

The MSCI Asia Pacific-ex Japan index posted a second quarter loss of .3%.

The Shanghai composite index posted a second quarter loss of  -5.55%%.

The Russell 1000 posted a second quarter loss of .35%.

Recent positive fundamental news within the portfolio has been abundant.

1.      Mastercard announced a deal with China Unionpay to process foreign payments on the Mastercard global interchange network.    


http://finance.yahoo.com/news/MasterCard-signs-agreement-apf-3929042135.html?x=0&.v=1

This processing win is perhaps the biggest global credit/debit card development of 2011.  The announcement was quietly announced on June 30th, 2011.  It was completely ignored by  brokerage analysts; evidently they were preoccupied with analysis of the new debit fee pricing system to be implemented in the United States.   Chinese nationals will soon be able to use their co-branded Mastercard products outside of China.  In turn, Mastercard will benefit from routing volumes on their system, and stand to earn cross border assessments.  The long term magnitude of this win cannot be overstated.  China Unionpay is the largest issuer of credit and debit cards in the world.  Their total number of cards in issuance greatly exceeds that of Visa, and within the next 24 months could surpass that of Visa and Mastercard combined.  Visa’s adversarial approach to business dealing with China has directly benefited Mastercard.  In the past year, Mastercard scored co-branding wins on all 9 of the China banking tenders.  Visa did not win a single tender.   

Mastercard also looks to benefit from the proposed CBD-Carrefour Brazil merger under negotiation in Brazil. Mastercard is the branded store card of CBD, and the combined firm could account for 28% of all food, electronics and furniture retailing in Brazil.  Considering the rapid growth in Brazilian GDP, and taking into account the fact that ITAU bank (the bank which is joint venturing with CBD with their store branded cards) is also  the primary credit card bank for both Carrefour and CBD, business trends appear highly encouraging.        Credit card penetration is low in Brazil, but has been growing far faster than GDP. 

There is bigger potential associated with the Unionpay-Mastercard business partnership.  

Eventually, I  look for China Unionpay to be publicly listed.  Once a value has been established for the world's largest credit/debit card processing network, China Unionpay will then be in a position to take over MA  via a share exchange or buyout.  In the meantime, the Chinese state owned firm will be able to assess the revenue stream coming to the Mastercard interchange systems and gain access to a valuable global interchange network.  

Mastercard's global strengths are greatly understated by US analysts.  Mastercard holds the number #1 market share in Europe, will be generating more asian  than United States revenues by 2012, and are growing their market share vs Visa in Brazil and Mexico.  Even in Canada, there are more Mastercard branded cards than  Visa branded cards.   American analysts, in my view, are on the wrong end of the credit/debit card story when they report on Visa as being a better investment than Mastercard.    

2..     It was reported that Mazda will be building a new assembly plant in Mexico, in an area serviced by Kansas City Southern.  

http://www.insideline.com/mazda/mazda-to-invest-500-million-in-mexico.html

This will add significant freight volumes commencing in 2013, as the plant will produce up to 140,000 vehicles per year.   Analyst estimates for KSU will need to be revised higher in that year.  I have not yet read a single analyst comment on the new plant and its implications for revenues at KSU.

3.      Wilson Sons announced an acquisition of BricLog.  


http://wilsonsons.riweb.com.br/Default.aspx

BricLog is a port terminal that services the Brazilian offshore exploration and development industry.  The purchase will further accelerate the rapidly growing oil terminal business of Wilson in Brazil.  BricLog facilities are located in the same bay as one of Wilson's oil service port terminals. 

Wilson also confirmed a six year capex program totalling $1.8 billion US. When completed in 2017, the company should have a fixed asset base 4X the present size.  The shares clearly have potential, should all go as planned, to evolve into a smallish large cap equity, by the end of that period.    Historically every $1 invested by Wilson for capex has produced a revenue flow of $.80 per annum at full output.  Should the company generate historic revenue and EBITDA on the new capex plan, incremental revenues could surpass $1.44 billion at the end of the current program.  EBITDA margins, at roughly 26% could surpass $375 million on the incremental program.  When these forecast revenues and EBITDA are added to the 2011 projected figures ($650 million revenues and $169 million EBITDA respectively) it seems clear to me that Wilson has strong growth potential for the coming six years.  

Based on the news from Kansas City Southern and Mastercard, the blog model portfolio will be adding shares in both companies.

The portfolio has $5,410.20 US of cash on account.  53 shares of KSU  will be added at market.  This will cost $3206.43 US inclusive of commission.  7 shares of Mastercard will also be purchased for a net investment of $2,176.29.