In the first half of 2008, the Hurley Capital Core Equity Composite of accounts managed by Hurley Capital rose 1.0% after all fees and expenses. In comparison, the S&P 500 fell 11.9%, including dividends.

Our 2008 outperformance to date is due strong second quarter returns:

Q208 Investment Performance

• Macro Drives Micro - Invest in industries with positive secular or cyclical trends. Within those industries, find inexpensive stocks. Our investment in Wal*Mart is taking advantage of the cyclical trend of consumers "trading down" into more affordable products. At recent prices, we  believe Wal*Mart trades at an 8-9% free cash flow yield, that will grow in 2009. Importantly, avoiding struggling industries has prevented us from "bottom-fishing" in home-builders, financials or consumer discretionary sectors.
• Buy At Discounts To Private Market Valuations - Loews Corp trades at about a 25% discount to the value of its investments. While these investments may fall in value, we get the proven skills of the Tisch family at a discount and the benefits of any value-creating transactions for free. Chesapeake Energy trades at a about 12% free-cash-flow yield on current 2009 estimates, not accounting for any of the upside associated with ongoing exploration success. The stock is up this month, on a recent announcement of a partnership on a new natural gas find in Louisiana that implies $10 billion of additional value to shareholders.
• Invest Defensively - A company's underlying value, if not its stock price, is defined by the level of free cash flow it can produce. We believe that if we can find companies with high and durable free cash flow, our investment can be considered defensive. Leading Korean wireless telecom provider SK Telecom should have a free cash flow yield of over 12% this year based on current prices. With the sale of its underperforming Helio wireless startup in the USA, we believe this defensive investment should hold it's value. Enbridge Energy Management and our prior ownership of Stamps.com are other examples of defensive investments that have held their value in these difficult market conditions.

Comparison Of Change In Value
Of $10,000 Investment, Net Of Fees

The Hurley Capital Managed Accounts Composite represents all actual client accounts invested in this strategy for the entire year.  The Hurley Capital Managed Accounts Composite allocates client portfolios in equity and fixed income investments, weighted according to Hurley Capital's proprietary investment strategy. 

Actual client accounts utilizing the Hurley Capital Managed Accounts Composite may have varying allocations between equities and fixed income investments based on individual investment preferences.   The results of the Hurley Capital Managed Accounts Composite are net-of-fees, brokerage commissions, and other expenses.  Hurley Capital's investment advisory fees are described in the disclosure statement of Part II of the Form ADV which is available upon request.

The results of the Hurley Capital Managed Accounts Composite include the reinvestment of dividends.  Comparison of the Hurley Capital Managed Accounts Composite to the S&P 500 and NASDAQ Composite is for illustrative purposes only and the volatility of the indices used for comparison may be materially different from the volatility of the Hurley Capital Managed Accounts Composite due to varying degrees of diversification and/or other factors.

Past performance of the Hurley Capital Managed Accounts Composite may not be indicative of future results and the performance of a specific individual client account may vary substantially from the composite results above in part because client accounts may be allocated among several portfolios.  Different types of investments involve varying degrees of risk, and there can be no assurance that any specific investment will be profitable.

Performance is expressed in US Dollars (USD). A complete list of current recommendations is available upon request.