By Ironwood Investment Management The stock market is just that, a market. The dynamics are no different from a buzzing street bazaar, with buyer and seller enthusiasm ebbing and flowing with the emotions of the day. Our focus is on the long-term merits of companies with multi-year event-driven transitions, and we pay attention to the long-term value we receive.
As long as our expectations for the end-of-transition scenario, or "exit economics," remain intact, we will endure the volatility in both the share price and near-term fundamentals. This unfashionable near-term volatility is what periodically can push investors away from the transitions stocks that make up our portfolio. Large cap stock market index prices were flattish at best in the third quarter, with small-cap and mid-cap indices recording sizeable declines. The share prices of our holdings in the Smidcap Value portfolio were not immune to this broad market price volatility. Combined with the emotions that surround our companies' near-term prospects, our portfolio can produce quarterly returns that have relatively low correlation to the benchmark index.
Our portfolio returns in the quarter were significantly impacted by our energy-related holdings. Although our energy companies continue to execute on their event-driven transition strategies, their near-term share prices were prey to investors selling off their exposure to falling oil and gas prices. High position concentration and low turnover are integral components of our strategy. At the end of the third quarter, we held 33 stocks. Year-to-date turnover has been 29.7%. We purchased three new names in the quarter: Cabot Microelectronics (CCMP), Darden Restaurants (DRI) and CBS Outdoor Americas (CBSO). Cabot Microelectronics, a producer of supplies to semiconductor companies, is undergoing a product transition that will restore strong growth to its currently mature business.