Sunday, May 6

2018: First Quarter Review


Portfolio Update  
The recent portfolio updates covered the portfolio changes in Q1, so OM won’t spent too much time on them: 

- International: Our Man continued to add to the International portfolio.   The continued positive economic information out of Greece, encouraged OM to increase his exposure (GREK).   OM took advantage of the pull back in the markets, to enter an initial position in Vietnam (VNM).

Performance and Review 
The first quarter saw the  portfolio fall -0.3%, which was broadly in-line with the S&P 500 Total Return (-0.7%) though ahead of the MSCI World (-2.2%).  The flat quarter disguised some substantial volatility within the quarter, with the portfolio rising 11.3% in the first 3 weeks of the year before giving almost all of that back within 2 weeks.  The portfolio continued to bounce around to a lesser degree throughout February and March.



Despite the volatility in equity markets, the Equities positions were the largest gainers led by Vipshop Holdings (VIPS, +147bps) and Texas Pacific Land Trust (TPL, +54bps).  After its Q4 announcement of a partnership with Tencent and JD.com, who both also took stakes in the company, VIPS announced strong Q4 results during February.  TPL also had strong results, with 2017 marking “the most successful year in the Trust’s 130-year history”, with the new “Water Service” business getting off to a strong start.  TPL also continues to slowly dissolve itself, buying back another 1.7% of the company in 2017.

The International book was all over the place; large contributions from Brazil (+196bps) were offset from just about everywhere else led by Argentina (-104bps), India (-60bps) and Greece (-30bps). 

The Uranium positions, in the Commodities book, continue to frustrate with both the Uranium ETF (URA, -160bps) and Nexgen Energy (NXE, -37bps) falling back.  The price action remains disappointing (at best) while the fundamentals are attractive – the impact of capacity reductions “should” be felt during the second quarter, especially if companies have to enter the spot market.  Unfortunately, one item of note is that the underlying index for the ETF was changed to reduce the exposure to small mining companies and introduce some nuclear component companies.  These smaller mining cos were part of the attraction to Our Man, thus URA’s leash has been shortened further.   


Portfolio (as at 03/31/18 - all delta and leverage adjusted, as appropriate)
49.4% - International (Brazil ~25%, Argentina ~11%, Greece ~5%, India and Vietnam)
27.7% - Technical (DDM, QLD and SSO)
17.9% - Equities (JD, VIPS, TPL, FNMA & IBB)
10.2% - Funds (CWS, GVAL, and CAPE)
8.0% - Commodities (Uranium through URA & NXE)

0.6% - Cash 

Disclaimer:  Nothing above represents a recommendation in any way, shape or form so please don’t even think of trying to take the above that way.  For added clarity, while Our Man is invested in all of the securities mentioned that’s a terrible reason for anyone else to do so.  Our Man also holds some cash and a few other securities (of negligible value).  You should not buy any of these securities because Our Man has mentioned them, but should do your own work and decide what’s best for you given your own circumstances/risk tolerance/etc.