Portfolio Update
-
International/Country: OM reduced the
size of the Argentina position after exiting the position in Banco Macro (BMA),
which has performed exceptionally strongly all year but has priced in a lot of the
potential changes while (due to being a bank) retaining more risk of political
intervention than most of the other Argentina names. Broadly speaking, the Argentina thesis is
playing out well, with foreign investors starting to look more in-depth at the country
given the likely change of government later in 2015.
- NCAV Book: While
this had no impact on the portfolio, as there are no existing positions in the
NCAV book, OM decided to close it down permanently. This was not the result of performance as the
book has been profitable in 4 of the 5 years (contributing ~65bps to
performance) and it’s also out-performed the S&P 500 TR on a ROIC basis by
a significant margin over that period.
However, it’s a book that uses a very small amount of capital but that
takes up some time both in running the screens, and in the various processes
that OM has to go through in order to trade the names.
Performance Review
March saw the
portfolio rise 36bps, resulting in a +8.6% YTD performance during the first
quarter.
Once more the key driver of performance was the portfolio’s bias towards being Long US Dollar. This resulted in the Currencies book (+97bps) and the China Thesis book (+36bps) producing exceptionally strong gains, driven by the US Dollar’s strength versus the Euro and the Australian dollar. However, it should be noted, that Our Man’s decision to exit the Chinese A-Shares (CAF) last month has resulted in much missed opportunity cost. While there are certainly bubble-like elements to the sharp rise in Chinese A-shares, OM could (and perhaps should) certainly be participating in their continued rise especially given his original thesis (that China was slowing down, and that being L A-shares was a great hedge to the S Australia dollar position, as it would benefit significantly from any QE or stealth QE in China) is largely proving out. On the negative side, the position in Precious Metals (-46bps) held through the Gold Miners has continued to cost money; Our Man was unquestionably early here, though it’s not clear that he’s wrong (yet).
The International/Country book (+30bps) was a continuation of much of what we’ve seen over recent months. The European positions continue to be choppy (-70bps, though this includes currency losses from the Euro's weakening), whereas Argentina continues to be exceptionally strong (+108bps).
Once more the key driver of performance was the portfolio’s bias towards being Long US Dollar. This resulted in the Currencies book (+97bps) and the China Thesis book (+36bps) producing exceptionally strong gains, driven by the US Dollar’s strength versus the Euro and the Australian dollar. However, it should be noted, that Our Man’s decision to exit the Chinese A-Shares (CAF) last month has resulted in much missed opportunity cost. While there are certainly bubble-like elements to the sharp rise in Chinese A-shares, OM could (and perhaps should) certainly be participating in their continued rise especially given his original thesis (that China was slowing down, and that being L A-shares was a great hedge to the S Australia dollar position, as it would benefit significantly from any QE or stealth QE in China) is largely proving out. On the negative side, the position in Precious Metals (-46bps) held through the Gold Miners has continued to cost money; Our Man was unquestionably early here, though it’s not clear that he’s wrong (yet).
The International/Country book (+30bps) was a continuation of much of what we’ve seen over recent months. The European positions continue to be choppy (-70bps, though this includes currency losses from the Euro's weakening), whereas Argentina continues to be exceptionally strong (+108bps).
The Equities (-29bps) and Technical (-51bps) books
were both negative contributors as markets fell again in March. The Technical book, despite it’s negative performance,
so no signs of any sell signals and one is unlikely unless the damage is
somewhat deeper and/or more sustained.
The equities book saw weak performance from the Theravance companies
(THRX/TBPH which cost a combined 78bps) after they received only partial FDA
approvals for product extensions. These
losses were offset by the continued rise of VIPS, where management continue to
execute and the company continues to grow both exceptionally quickly AND
profitably! The Energy Efficiency book
(-1bps) had no material impact.
Portfolio (as at 3/31 - all delta and leverage adjusted, as
appropriate)
22.4% - Technical Book
(DDM, QLD and SSO)
21.7% - Equities (EOX,
GPOR, RDY, TBPH, THRX, TTM, TWTR & VIPS)
15.9% -
International/Country (EWI/EWP/GREK in Europe, GVAL, and Argentinian names)
2.7% - Precious Metals
(GDX)
0.0% - Energy Efficiency
(AXPW, and XIDE)
-20.6% - China-Related Thesis (CROC – Short Australian Dollar)
-20.6% - China-Related Thesis (CROC – Short Australian Dollar)
-44.6% - Currencies
(EUO – Short Euro, YCS – Short Japanese Yen)
15.8% - Cash
Disclaimer: For
added clarity, Our Man is invested in all of the securities mentioned. He
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.
