BlueOrange Asset Management October results
Our weighted average return in October was +1.5%, bringing our year-to-date 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%.”
In our August commentary, we mentioned that the energy sector looked oversold. As such, we increased our energy exposure in September and benefited from the continued price recovery in energy stocks. Last month, we exited our energy plays (FANG US, XLE US) having made quick, but substantive double-digit profits. We anticipate that energy price volatility will continue to provide trading opportunities in the energy sector for the foreseeable future.
In our September commentary, we highlighted the sale of Shopify (our best performing investment) near its all-time highs. Thankfully, a short-seller media stunt based on unsubstantiated claims triggered a heavy sell-off in Shopify shares and we bought back in at attractive levels far below where we had sold.
Another highlight this month was Eurocastle Investment Limited (ECT NA). Eurocastle has made a fine business of buying Non-Performing Loan portfolios in Italy. In October, ECT announced a tender offer to buy back approximately 13% of their outstanding shares at a 6% premium to market prices. Share buybacks at a premium to market prices are a bit of an anomaly in capital markets, but ECT’s maneuver served as a strong confirmation of our investment thesis. To provide some extra context, we started buying shares of ECT on August 31st, 2016. This original position has generated a total return of 75%. Eurocastle is not a high-flying tech stock – just a very well-run company that buys assets on the cheap and has the patience to reap excellent returns. This time management decided to deploy its discipline of buying undervalued assets on its own stock. Bravo!
Turning to global debt markets, October was a decidedly non-descript month - major international bond indices were pretty much flat. Global economic growth continues to put pressure on central banks to raise rates. This will be bad for bond prices, but it is clear that institutional investors are continuing to buy bonds at these levels quite simply because they have to. It will be interesting to see how these investors react when conservative bond portfolios begin showing consecutive months of mark-to-market losses.
Please feel free to contact us firstname.lastname@example.org 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!
Important Legal Information
Nothing contained herein constitutes an offer, solicitation or recommendation regarding any investment product or service, or the offer to sell or the solicitation of an offer to buy any financial instrument; nor shall any such services be provided, or financial instruments be offered or sold, in any jurisdiction in which such an offer, solicitation, provision or sale would be unlawful. All content is subject to applicable statutes and regulations. Any potential investor should satisfy oneself that an investment in any product and/or service mentioned in this material is permissible under the rules and regulations of his or her domicile. This material is not directed to any person in any jurisdiction where (by reason of that person's nationality, residence or otherwise) the availability of the material is prohibited.
The information provided is for reference only and investors should determine for themselves whether a particular service or product is suitable and appropriate for their investment needs or should seek such professional advice for their particular situation. Please refer to offering documents for further information concerning specific products.
Certain statements contained herein may be statements of future expectations and other forward-looking statements that are based on current views and assumptions of AS BlueOrange Bank and involve known and unknown risks and uncertainties that could cause actual results, performance or events to differ materially from those expressed or implied in such statements. In addition to statements which are forward-looking by reason of context, the words “may, will, should, expects, plans, intends, anticipates, believes, estimates, predicts, potential, or continue” and similar expressions identify forward-looking statements. BlueOrange assumes no obligation to update any forward-looking information contained herein.
Past performance is no guarantee of future results. Investing in the financial markets is subject to certain risks including market, interest-rate, issuer, credit, and inflation risk. Financial instruments may appreciate or depreciate in price owing to conditions, whether real or apparent, in a given market, economy or industry. The value of investments, and the income from them, can go down as well as up, and you may not recover the amount of your original investment. Where investments involve currency exposure, changes in rates of exchange may cause the value of the investment to go up or down. Any tax benefits referred to on this material are subject to change and their availability and value will depend on your individual circumstance.
Although BlueOrange has taken reasonable care to ensure that the information contained within this material is accurate, no representation or warranty (including liability towards third parties), expressed or implied, is made as to its accuracy, reliability or completeness by BlueOrange. Opinions and any other contents of the material are provided by BlueOrange for personal use and for tentative reference only. Nothing contained on this material constitutes investment, legal, tax or other advice and is not to be relied on in making an investment or other decision.
© 2017 AS BlueOrange Bank. All rights reserved.