Tag Archives: Investment Performance

Pirkt un turēt – vienkārši, ne viegli

Ja tev būtu jāizvēlas starp ieguldījumiem divos uzņēmumos, tikai skatoties uz akcijas cenas grafikiem, kurā tu būtu vairāk gribējis ieguldīt 2000.g. sākumā?

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Esmu pārliecināts, ka lielākā daļa no jums izvēlētos pirmo variantu. Apsveicu! Šis grafiks ir Amazon, pasaules 2. vērtīgākais uzņēmums. Ja būtu nopircis šo akciju 2000.g. janvārī, un turējis to līdz šodienai, tavs ieguldījums būtu pieaudzis par 2 157%!

Ja Amazon grafiks likās pievilcīgāks redzamās straujās izaugsmes dēļ, šeit ir daži pārsteidzoši fakti. Ja būtu pircis Amazon 2000.g. janvārī, 2001.g. oktobrī tu būtu zaudējis 93% no savas ieguldītās naudas. Paietu vēl 6 gadi, pirms tu būtu atguvis savu pamatkapitālu 2007.g. septembrī. 20 gadu griezumā bilde ir smuka, bet diez vai tu šajos pirmos gados baigi lepotos par savu izvēli.

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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.

We were not particularly active in our portfolios last month but took advantage of weakness in European financials to buy back positions that we sold at higher levels. Unlike other asset managers that try to play around certain benchmarks, we only buy and hold what we like and what we believe will generate superior returns for our clients. This provides us with two major advantages over other asset managers: 1) we can take profits when we see fit and not be bothered if ‘underweight’ positions perform well; 2) it encourages us to seek out opportunities before they appear on other managers’ radars (this is where real alpha is generated).

Last month provided a very good example of us seeking out opportunities before they appear on other managers’ screens: we purchased Canadian medical marijuana stocks in our aggressive portfolios. Canada will be legalizing recreational marijuana on July 1st of next year, and the battle to meet consumer demand is raging. This sector has been on our radar for some time now, but we deemed a significant number of successful secondary financings in the space to be a tipping point for institutional investor acceptance. We made gains of over 40% in one month, took profits and continue to evaluate which companies will emerge as the true leaders in this space, as well as which of their competitors they might be buying up along the way.

Please feel free to contact us asset@blueorangebank.com if you would like to hear more about our investment strategies.

On the behalf our portfolio management team, I thank you for your continued trust and support!
Pauls
FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.
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OUR JULY 2017 RESULTS

Our weighted average return in July was +3.10%, bringing our year-to-date return to +11.86%.

During July we focused on analyzing corporate earnings releases. As a whole, the results were very impressive. As of the end of July 72% of S&P 500 companies beat their mean earnings per share (EPS) estimates and 70% beat their mean revenue estimates. These results were evidently very encouraging to equity investors. The S&P 500 ended the month up 1.95% and market volatility reached new lows.

Turning to the macro environment, the US central bank left rates on hold at the July meeting, citing lower than expected inflation levels. The European Central Bank also left interest rates unchanged and made no promises about upcoming stimulus tapering, despite increasingly positive Eurozone economic data. Positive Eurozone sentiment coupled with US political stalemates and chicanery (the failure of healthcare reform in Congress, the Trump investigation and a revolving door of senior White House staff…), pushed the US currency to new recent lows against the Euro, which gained 3.5% against the greenback during the past month. A lower US dollar should theoretically provide a boost to US exporters, and provide a headwind to international exporters to the US.

With the earnings season coming to an end, we see less catalysts in the foreseeable future, which could drive the already over-owned technology sector even higher. Keeping that in mind, we have sold the majority of our tech stocks and have been deploying capital to mining stocks. We have identified that the mining sector is incredibly under-owned and undervalued, especially when compared to the technology sector. This year’s P/E estimate for the global metals and mining sector is forecast at 13.39x vs. the 29.95x estimate for tech. It is also worth pointing out that the whole publicly traded metals & mining sector is valued at roughly $823 billion, whereas the market capitalization of Apple alone is now $827 billion.

Please feel free to contact us asset@blueorangebank.com if you would like to hear more about our investment strategies.
On the behalf our portfolio management team, I thank you for your continued trust and support!
Pauls
FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.
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OUR JUNE 2017 RESULTS

Our weighted average return in June was +0.23%, bringing our year-to-date return to +8.49%.

Last month we mentioned that we saw weakness in tech stocks, and in June, we saw continued volatility in this sector. Thankfully, our rotation into different sectors helped offset losses on our remaining tech exposure.

One outperformer of note was Nike Inc. Nike shares have struggled for the past year-and-a-half, but they appreciated by 11.34% in June due to better than expected results and positive guidance going forward. Nike is a phenomenal brand that continues to invest in cutting-edge technology, yet it was trading at a significant discount to its peers. It had also been caught up in the widespread selloff of retail stocks. We were buyers of Nike shares on price weakness in May. When quality companies sell off, you sometimes have to ask yourself “will this be trading higher in five years?” Our answer was an emphatic “yes”. Moreover, 55% of Nike’s revenues come from outside the US, which means that their foreign revenues can be a tailwind in a weakening USD environment.

On the macro front, the US FED raised its base rate on June 14th. This was the third rate hike in the past six months and the market took in in stride – the US 10 year Treasury yield hardly moved. The FED also announced that it is likely to start reducing the size of its balance sheet “relatively soon”. Unfortunately, Janet Yellen seemed to tempt fate in her commentary: “Will I say there will never, ever be another financial crisis? No, probably that would be going too far. But I do think we’re much safer and I hope that it will not be in our lifetimes and I don’t believe it will.”

Yellen’s comments notwithstanding, the more significant display of confidence came from Europe. Draghi’s positive view on the state of Europe’s economy all but confirmed that the ECB’s quantitative easing program is indeed coming to an end (finally!).

Since Draghi’s commentary, yields have risen in both Europe and the US.

We have been waiting for the forthcoming normalization of monetary policy in Europe, and our positions in European financials continue to perform extremely well. We expect this trend to continue.

Please feel free to contact us asset@blueorangebank.com if you would like to hear more about our investment strategies.

On the behalf our portfolio management team, I thank you for your continued trust and support!
Pauls

FULL DISCLOSURE: Please note that the opinions expressed in this blog should in no way be considered as investment advice or a solicitation to buy or sell securities.
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OUR MARCH RESULTS

Our weighted average return in March was +0.68% bringing our YTD return to +5.08% (net of all fees).

In March, many of the Trump trades (financials, cyclicals, small caps) got hurt as it turned out that not all Republicans are ready to repeal Obamacare, much less replace it with Trump’s “World’s Greatest Healthcare Plan of 2017” (yes, this was the actual title!).  The failure to pass this new bill cast doubt on just how united the Republican majority actually is, and undermined the market’s confidence in Trump’s ability to push through tax reforms.

The past month’s political events (failed healthcare reform, travel bans on Muslim states, general nonsense…) served to highlight that the United States of America still consists of three independent branches of government: 1) Legislative (The House of Representative & Senate), 2) Judiciary (The Supreme Court), and 3) Executive (The President). The Founders were very deliberate in their separation of these three branches so that the US Constitution could not be undermined or rendered subservient to tyranny. So far so good.

Returning to capital markets, the FED’s rate hike of 25 basis points on March 15 turned out to be a non-event. The yield on US 10-year notes climbed leading up to the FED announcement but declined afterwards. This did not surprise us. The more the market experiences these sorts of events, the less it tends to react. The US 10-year yield is currently hovering around 2.35% – the same level it was at a few years ago when the base rate was significantly lower and the FED was in full-on monetary expansion mode. US treasury yields are important because they serve as a reference point for other fixed income securities. Bond yields and bond prices have an inverse relationship. Therefore, continued low yields mean continued high prices in bonds. This is beneficial to our clients that already hold bonds, but makes it a challenge to initiate new bond positions that offer attractive risk/reward dynamics.

Turning to equities, our overweight in technology stocks and European equities continued to add to our overall performance.  We have begun initiating positions in European banks (see: https://blogs.blueorangebank.com/?p=1382) based on improving European economic data. It looks like we have been a little bit early, but we do not mind increasing high conviction positions on price weakness.

Going forward we expect to see some volatility in European stocks as the French election approaches. Earnings season is about to get under way again and we will be busy analyzing individual company results to ensure that our investment rationales are still on point.

On the behalf of our client portfolio management team, I thank you for your continued trust and support!

Pauls read more

Amazon reaches new highs

It seems that Amazon is unstoppable. Of course it isn’t but it may seem so.

There are plenty of articles that help Amazon go even higher, such as:

It’s most ambitions sports deal to date Amazon wins streaming rights to 10 NFL games

Amazon launches Amazon Cash, a way to shop its site without a bank card Link

Also, absence of bad press helps.

We’ve been writing about Amazon for quite some time and perhaps mentioning it too often. It’s been very profitable position for our clients and we’re still bullish. read more

How Most Investors Underperform The Market

In our January commentary we wrote:

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.

We continue to abide by what we wrote.

LINK: Our January Results

However, it seems as if cutting and running is a huge problem for retail investors. Panic induced selling leads to missing returns as markets recover and trade higher.

Here is a great summary of this phenomenon by Josh Brown of “The Reformed Broker”:

Investors Underperforming Their Own Investments

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OUR FEBRUARY RESULTS – STILL A GREAT START TO 2017

OUR FEBRUARY RESULTS – STILL A GREAT START TO 2017

Our weighted average return in February was +1.95%, bringing our YTD return to +4.38% (net of all fees).

Many of the themes that we wrote about last month are still very much in play. Biotech continues to deliver and so too do our investments in robotics. Our European investments also had a good month and our bonds continue to deliver steady returns.

The ongoing flow of positive economic data from the US will probably result in further tightening from the US Fed in March. Economic data in Europe is also picking up. Inflation in Germany is at + 2.2%. If this continues, how long can the ECB leave rates at 0%? Whomever answers this question most accurately will make a lot of money. We do not know when rates in Europe will rise, but are aware of the fact that this could be sooner than most people think.

Looking forward to March, we do not anticipate any radical departures from our current investment strategies. We do not find this market ‘crazy’ or ‘overvalued’. Both are relative terms usually used by those that are usually do not fully appreciate deeper intricacies of human psychology and/or securities markets. Our job is to make money by making choices, not by giving or listening to opinions.

Lastly, no, we did not buy SNAP Inc. for our portfolios.

Thank you for your continued trust and support!
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Our December, Year End and Two Year Results

We are pleased to announce that our weighted average return in December was +1.81%, resulting in an annual return of +11.05% for 2016 (net of all fees).

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December was a decidedly less eventful and more prosperous month than November. Both equity and bond markets were considerably less volatile than during November’s post-US election madness and US equity indices powered to new highs. As expected, the US FED did indeed raise rates and signaled that there could be up to three rate hikes in 2017.

In terms of our investment strategy, our decision not to overreact to a sell-off in Emerging Market bonds proved correct and our increased equity exposure contributed significantly to our positive December results.

As we start a new year, there seems to be a consensus in the air that 2017 will be a year of uncertainty and many challenges. While we understand the rationale for such a stance (a Trump presidency, rising rates, elections in Europe…), we cannot remember a time when any new year was predictable and without challenges. As such, we remain vigilant in trying to be maximally objective in regularly evaluating our current investment strategies, while trying to identify even better risk/reward opportunities going forward.

Our goal is to generate superior absolute returns for our clients. For most asset managers this means broad diversification and trying to avoid volatility at all costs. Some of the problems associated with this generally accepted approach are 1) correlations breaking down when you need them most, 2) following the crowd, 3) decision paralysis and/or 4) over-hedging.

In order to avoid some of these potential pitfalls, we put a considerable emphasis on opportunity cost. This means actively selecting investments that present the best long-term risk/reward dynamic for each client’s individual investment mandate. It also means delving deeper into what we are actually buying and why, rather than just targeting asset allocations. For instance, it means that good stocks are better than bad bonds regardless of asset class bias.

Although 2016 was a good year, we take even greater pride in the fact that our net absolute returns since the start of 2015 have outperformed the 2-year total returns of the following individual major asset classes: US Large Cap Equities (SPY US), US Investment Grade Bonds (BND US), and Emerging Market Bonds (EMB US). Beating the returns of each of these different asset classes is the best possible validation of our investment strategy, and we look forward to the challenges that await in 2017.

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As always, we thank you for your continued trust and support, and wish you a happy, healthy and prosperous new year! read more