1. KIRWAN
CAPITAL
13000 CR 348
St. Joseph, MO 64505
Missouri 816-385-5266
Nebraska 402-212-0519
Toll Free 888-666-8117
pk@kirwancapital.com
www.kirwancapital.com
January 11, 2017
Stocks continued to move upward in the forth quarter and for the year, sustaining what has now become a
nearly 8 year bull run, albeit with a few hiccups along the way. The biggest news of the 4th quarter and
probably the year was likely the election of Donald Trump. Initially, the futures market sank precipitously
on the news, but quickly rallied through the end of the year. Many individual stocks moved in opposite
directions as investors placed bets on winners and losers as a result of the anticipated political about-face.
The market appears to be pricing in heavy infrastructure spending, lower taxes, reduced regulations, and
higher expectations for inflation and growth. With this in mind, the Fed raised rates by 1/4 point in
December, the first increase in a year. The increase was widely expected, and was met by the market with
a yawn. OPEC cut a deal late in the year which helped oil prices recover somewhat from multi-year lows,
but the specter of higher U.S. shale production will likely continue to hang over the market for years to
come.
The S&P 500 Index, as gauged by the SPDR ETF, finished the year gaining 12.00% after a 3.95% gain for
the 4th quarter. This compares to the Kirwan Capital Strategy accounts composite average gain of 13.95%
for the year, and 3.92% during the 4th quarter. Our average compound annual return after fees since Jan 1,
2013 is 14.10%, which would have turned a $10,000 investment into just over $16,950 in 4 years.**
Our portfolios were helped during the year by nice moves in Amazon, Deere, and Hershey, but were
pulled down by Starbucks and recently Hanesbrands, which have become our two largest holdings.
During the year, we trimmed some positions in Schlumberger, Spectra Energy, Praxair, Cummins, and
Discover Financial Services, while adding to our Wells Fargo and Starbucks stakes. We also added a
couple of new positions during the 4th quarter, the aforementioned Hanesbrands, Inc., Anheuser-Busch
InBev, and Mondelez International. Hanes (HBI) was originally purchased at around 11 times forward
earnings and a 20% discount to it's high price for the year, and continued to fall. Feeling strongly that we
originally purchased the name at a steep discount to fair value, I continued to add to the position as it
became even cheaper, until it has become the top holding in our portfolios. Although many money
managers cringe when a large position falls in price for an extended period of time, and I admit a bit of
discomfort when considering my quarterly return figures, a slow decline like we have seen with Hanes has
given ample time to re-examine our investment thesis, and the opportunity to buy more shares at lower
prices. As you have likely noticed, I took advantage of that opportunity in spades. I am confident this will
turn out to be a very nice investment in time. The other two newcomers are both great companies that fell
in price for an extended period, and we again took advantage of the opportunity.
I usually like to add an informative discussion on a timely topic to my year end letters, but this year I had
nothing currently relevant in mind. I did, however, come across some information about precious metals
that I found interesting, so I digress... I often have people ask me about investing in gold, as I assume they
have seen or heard one of the numerous ads that have run pretty much continuously for as many years as I
can remember. To help shed some light on gold as an investment, I gathered the following information: If
you would have bought gold 37 years ago, you would have paid $607.20 per ounce at the closing price on
Jan. 9, 1980. At the close of trading this Jan. 9, you could have sold that gold for $1178.50 an ounce, a
gain of under $600, and less than double your initial investment. This return, however, fails to account for
the fact that your $607.20 in 1980, due to inflation, would be equivalent to $1778.51 today, so your gold
actually lost purchasing power over this holding period! On the other hand, if you would have taken that

2. KIRWAN
CAPITAL
13000 CR 348
St. Joseph, MO 64505
Missouri 816-385-5266
Nebraska 402-212-0519
Toll Free 888-666-8117
pk@kirwancapital.com
www.kirwancapital.com
same $607.20 and invested it at the same rate of return as the S&P 500, you could have sold those shares
yesterday for $12,633.43, a gain of more than 20 times your original investment. In addition, there is
generally a commission near 5% on gold transactions, while a transaction to sell an S&P 500 ETF would
cost you around $10 at most self-directed brokerage firms. Finally, as a prudent investor, you likely would
have been paying to store and insure your gold every year as well, which very well may have cost more
over 37 years than you could sell it for today. By the way, the reason you can scarcely open a magazine,
turn on talk radio, or watch non-primetime television without seeing an ad selling gold as an investment, is
the 5% commission (and a lack of regulation), NOT all the money investors are raking in. While many
people believe gold will keep pace with inflation, it hasn't done so since 1980, and I don't believe it will in
the future either, due to efficiencies gained in mining production, and the effect of this on the
supply/demand curve. While certainly better than cash under your mattress, I think you can venture a
guess as to what my advice might be on investing in gold.
On a slightly more relevant note, I recall a quote from John Templeton, founder of the Templeton funds,
that bull markets are "born from pessimism, grown on skepticism, mature on optimism, and die on
euphoria." I would argue that we have entered the optimism phase since the election. While there is
unfortunately no way to definitively tell how long each phase may last, or even which phase we are in, I
am nonetheless cognizant of where I think we are in the cycle, and hopeful that this understanding can
help us avoid pitfalls and take advantage of opportunities. Thanks again for your trust, and I wish you all a
fruitful new year.
Patrick J. Kirwan
President and Portfolio Manager
Kirwan Capital LLC
* SPY is the ticker symbol for the SPDR S&P 500 ETF. It's purpose is to closely track the stocks in the S&P 500 Index.
An oft cited proxy for the U.S. equity market, it is the most heavily traded security in the world. It can thus easily be
purchased by any investor, which is why I use it as the benchmark against which to gauge our performance.
**Due to the individually managed nature of our accounts, not all accounts have similar performance. Factors such as
available cash, tax considerations, and timing of previous purchases or sales can effect returns. In addition, transactions
noted may or may not have been made for all accounts. Returns noted are an average of all accounts in aggregate.