OUR JANUARY RESULTS

We are pleased to announce that our weighted average return in January was +2.07%. Since 2015, we have generated a net return of 40.14% with a Sharpe ratio of 1.56.

In terms of investment strategy performance, our weighted average net returns for January were (a) -0.41% for conservative strategies, (b) +0.64% for balanced strategies, and (c) +4.59% for aggressive strategies.

January was dominated by three major themes: (1) excellent returns in global equity markets, (2) US dollar weakness, and (3) a selloff in US treasuries.

read more

Crypto -vs- Actual Miners

We have been following the progress of mining sector securities for quite some time now (Because You Know I’m All About That Base, ‘Bout That Base, Base Metals).

The arguments supporting this trade are:
a) reduced capex and lack of investment in new mines
b) long lead times to new supply (it takes around nine years to build a new copper mine)
c) simultaneous global growth and a resulting increase in demand
d) management commitment to returning cash to shareholders

Given the hysteria around crypto currencies and the resulting incentive to ‘mine’ them, we decided to compare the market capitalizations of the largest publically traded mining companies in the world to the largest crypto currencies. The results were quite interesting: the top five crypto currencies were worth around the same amount as the seven largest publically traded miners on earth.

read more

OUR DECEMBER RESULTS

We are pleased to announce that our weighted average return in December was +2.72%, resulting in total net return of +18.39% in 2017. Since 2015, we have generated a net return of 37.30% with a Sharpe ratio of 1.48.

In terms of investment strategy performance, our weighted average net returns were (a) +4.34% for conservative strategies, (b) +15.34% for balanced strategies, and (c) +28.40% for aggressive strategies.

In our November commentary, we mentioned that many of our favoured sectors had performed poorly. In December, they stormed back with a vengeance. Our largest individual equity holding – Canadian mining company Teck Resources Ltd. – rallied 15%. Our largest equity fund holding – the Polar Biotechnology fund – increased by 4.75%. Both have continued to trade up strongly in the New Year.

read more

OUR NOVEMBER RESULTS

Our weighted average return in November was -0.36%, bringing our year-to-date return to +15.26%.

Many of our favoured sectors performed poorly in November – emerging market bonds sold off, biotech was weak and base metals miners underperformed. Thankfully, our asset allocations and security selection allowed us to preserve capital in our portfolios.

Earlier in the month, I attended an investment conference in Berlin and was taken aback by the amount of construction going on in the city. My perceptions of the German economic zeitgeist were confirmed later on in the month when I heard of an actual case of a commercial lease in Berlin being renewed at a 40% increase from its previous level. Unsurprisingly, Germany reported impressive GDP growth of 2.8% versus an estimate of 2.3%. Clearly low rates in Europe are having the desired effect in its largest economy. Moreover, the Eurozone manufacturing Purchasing Managers’ Index (PMI) hit a new record high of 60.1, which is consistent with a growth rate of more than 3%. Not so long ago Europe was petrified of deflation and interest rates were below 0%. Now the stage has been set for what could be considerable inflation. It remains to be seen how the ECB will navigate this new environment, but we will be avoiding investment grade, long duration European bonds for the foreseeable future.

read more

OUR OCTOBER RESULTS

Our weighted average return in October was +1.5%, bringing our year-to-date net return to +15.68%.

Last month, equity markets traded up strongly and US corporate earnings continued to show impressive growth – most notably from the information technology (+22% EPS growth in Q3) and energy sectors (+156% EPS growth in Q3). According to Goldman Sachs “S&P 500 earnings grew by 7% in 3Q, the latest piece in a mosaic showing an extremely healthy operating environment for US corporates.” Furthermore, “S&P 500 earnings grew two percentage points faster than expected by consensus in 3Q. 51% of companies reported positive EPS surprises, in line with the first two quarters of 2017 and above the 15-year average of 47%.”

read more

On Nickel and the Battery Revolution

If you have been reading this blog, you will have understood that we quite like the prospects of base metals and base metals miners (Because You Know I’m All About That Base, ‘Bout That Base, Base Metals…).

Here is a nice primer on nickel’s not-so-know role in electric vehicles: Nickel: The Secret Driver of the Battery Revolution

Here is some more info on how analysts have been upgrading their pricing forecasts:
https://www.bloomberg.com/news/articles/2017-10-31/nickel-is-next-for-electric-car-boom-as-trafigura-turns-bullish

read more

OUR SEPTEMBER RESULTS

Our weighted average return in September was +0.60%, bringing our year-to-date return to +13.97%.

Equity markets continued to generate strong returns is September and bond prices weakened due to the continued prospect of higher rates in the US.

Last month, we mentioned that the energy sector looked oversold. We increased our energy exposure and benefited from a continued price recovery in energy stocks.

Our investments in base metal equities did not fare so well, but volatility is part of the price of admission in this sector and we have already seen a nice recovery in October.

read more

Big Picture Charts

Here is a link to Scott Grannis’s blog where he’s highlighted some interesting charts:
LINK: Big Picture Charts

The numbers are staggering.

One part that I would like you to pay particular attention to is not only long-term average equity returns, but long term-average equity returns after inflation.

If you do not put your money to work, inflation will gladly eat away at it bit by (not so little…) bit.

read more