Tag Archives: Historical Market Performance

Ostapenko Wins The French Open!!!

http://edition.cnn.com/2017/06/13/sport/jelena-ostapenko-french-open-latvia-raimonds-vjonis-kristaps-porzingis-baiba-brae/index.html

Jelena Ostapenko’s French Open victory @ Roland Garros is the greatest ever individual achievement by a Latvian athlete.

Jelena’s talent is undeniable, but talent must be nurtured and harnessed for it to reach its full potential.

After her daughter’s victory, Jelena’s mother mentioned in an interview, that it had cost the family about 500,000 EUR to train their champion daughter:
LINK: Ostapenko (in Latvian)
“Now Aļona earns on her own, but in her childhood there were people that helped. Everyone helped as best they could. It takes a lot of money to raise an athlete. To get Aļona into the WTA top 100 ranking, we needed about half a million” said Jeļena Jakoļeva
(«Tagad Aļona pati pelna, bet bērnībā bija cilvēki, kuri palīdzēja. Visi pēc savas iespējas palīdzēja. Nepieciešama liela summa, lai izaudzinātu sportistu. Lai ievestu Aļonu WTA ranga pirmajā simtniekā, mums kopā vajadzēja ap pusmiljonu,» atklāja Jeļena Jakovļeva.)

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OUR MAY 2017 RESULTS

Our weighted average return in May was +0.76%, bringing our year-to-date return to +8.2%.

May marks our 16th consecutive month without an average monthly drawdown of over 1.3%. Moreover, during this timeframe, we have only had two months of negative performance (-0.10% in September 2016 and -1.29% in November 2016). This consistency of performance is not attributable to hedging strategies or active volatility management, but to successful asset allocation and choosing good investments.

For quite some time, we have profited greatly from our overweight in technology stocks such as Amazon, Google, Facebook and Netflix. In May, we took profits on many of these positions. As we were in the process of selling, we were quite aware of the fact that we might be selling too early (see our blog). However, there are times that you simply have to say ‘thank you’ and walk away for a while. For many of these stocks nothing has really changed since we were buying them heavily in December, yet all of a sudden, they are now worth 30% more. Recognizing how sentiment can change and to what degree it can propel a stock is a very important component of active investing. Not letting your imagination get away from itself is just as important. It is nice when everyone agrees with you – but it is times like these that you must apply the highest degree of self-critique and suspicion.

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Facebook – A Bargain In The Rearview Mirror

Here’s a link to an article from ABglobal.com that shows how exceeding expectations can actually make ‘expensive’ stocks seem very cheap in retrospect:

LINK: Growth Stars

This chart that illustrates the differential between Facebook’s earnings expectations and actual earnings is quite enlightening and goes to show the degree to which analysts can underestimate new business models:

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Should we buy the dip?

Last Wednesday we saw a broad sell off in global equity markets. We had not seen this degree of a sell off for quite some time. For instance, the most widely used ETF (QQQ US) of the NASDAQ 100 Composite Index fell 2.54%. The next day QQQ rose by 0.87%, and on Friday it rose again by 0.42% – closing at a level that was just 0.87% away from recent highs.

Our foremost mission is to safeguard our clients’ capital. Therefore, when faced with drawdowns of a significant amplitude, we must decide whether fight or flight is the most appropriate response. In other words, should we be selling, or should we buy the dip?

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We Have Been Selling

In our January commentary (LINK): Our January Results), we said the following:

Looking at the broader market, all major US stock indices are at all-time highs. On the other hand, the Volatility Index (VIX), which expresses anticipated market volatility, is at historical lows. Although we have been taking profits on some of our high-flying stocks, we do not intend to try to time the market by selling stocks that we like in the hope of buying them back more cheaply in the future. This is called being ‘cute’. ‘Cuteness’ is the domain of babies and puppies, not investment managers.

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OUR APRIL RESULTS

Our weighted average return in April was +2.23% bringing our YTD return to +7.43% (net of all fees).

Earnings season has started and most of the companies in our portfolios that reported their earnings in April traded up strongly – most notably Amazon Inc. and Alphabet Inc. Both are currently trading at all-time highs, as are the major US stock market indices. We sold Amazon after earnings and thus increased our cash holdings. We might have to buy Amazon shares back at higher prices, but at the time being we prefer to err on the side of caution.

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How Major Asset Classes Performed In January

In a world inundated with terms like ‘alternate facts’ and ‘post truth’ we take comfort in numbers.

Our business is simple, you make money for your clients or you don’t. No amount of academic accreditations, algorithms or excuses can compensate for not making successful investment decisions (see ‘Long Term Capital Management’…).

Here is how major asset classes performed in January:

gmi.01feb2017
LINK: Major Asset Class Performance January 2017

And here is the performance of our top equity holdings:
top 10

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