The third quarter of 2008 saw continued volatility and the global financial crisis worsened rapidly. Markets reacted strongly to financial news, of which there was plenty. Government intervention in the US, UK and Europe was a key driver in market movements and this theme looks set to continue.We aggressively sold holdings in alternative energy - the sector was responsible for a great deal of underperformance. The recent retreat in oil prices has had a direct effect on the price of solar stocks. Concerns regarding the supply of poly-silicon also hit prices. However, we think that such concerns are overdone and there is potential within the industry. Our present solar holdings are cash heavy companies which should not be affected so much by the current financial situation.Elsewhere we bought Yara International, a leading producer of mineral fertilisers. A derating affected the stock's price but we think it remains good value as the firm is well placed to benefit from the need to increase crop yields.More generally, we feel that valuations are now more realistic, though financial risks remain a substantial concern and could derail any stabilisation of markets even from here.
