2016: Second Quarter Review

Portfolio Update  
- Equity:  Our Man finally managed to exit the Dr. Reddy’s (RDY) position late in the quarter, for a very marginal profit.

- Currencies: Midway through the quarter, after the strong rally in the Euro, Our Man added substantially to the S Euro position.

Performance and Review   
The second quarter proved far more generous than the first, with the portfolio rising +4.54%, leaving it -0.6% YTD.

The performance was primarily driven by the Precious Metals (+301bps) positions.  While both Gold (GLD, +27bps) and Silver (SLV, +68bps) contributed, it was the exposure to the Gold Miners (+207bps) that made the difference.  Our Man was too early into the Precious Metals positions in 2015, but the positions have more than recouped those losses and provided a healthy gain over 2015/2016.  The strong performance of the Precious Metals book (along with the Dollar strength, especially versus the Euro) meant that Our Man's portfolio was quite profitable in the days following ‘Brexit’.

The Equity book (-17bps) posted a small loss, as VIPS continues to work through its issues and the stock is between investor bases; while cheap (Internet company at less than 20x PE) and growing (40%+ p.a.), it’s also seen its growth slow from 100%+ p.a. and so is transitioning from being held by growth investors to more value-orientated ones.  The International book (+126bps) performed well, led by Pampa Energie (PAM).   Argentina continues to be the gift that keeps on giving – the pace of Macri’s reforms continues unabated, and MSCI moved the country to the watch-list for possible inclusion in the MSCI Emerging Markets Index.  

Finally, the Long Dollar positions were profitable with the China Thesis (+3bps) and the Currencies book (+41bps) generating returns as the dollar strengthened slightly against the Aussie Dollar and especially the Euro (post-Brexit).

Portfolio (as at 06/30 - all delta and leverage adjusted, as appropriate) 
16.1% - International/Country (GVAL, and Argentinian names)
14.4% - Precious Metals (GDX, GLD and SLV)
2.6% - Equities (VIPS)

-1.7% - China-Related Thesis (CROC – Short Australian Dollar)
-32.5% - Currencies (EUO – Short Euro)

49.8% - 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.