BlueOrange Asset Management January Results

Our weighted average return in January was +8.22%. Since 2015, we have generated a net return of +38.15%.

In terms of investment strategy performance, our weighted average net returns for January were (a) +2.36% for conservative strategies, (b) +7.64% for balanced strategies, and (c) +11.17% for aggressive strategies.

January was a considerably better month than December. As mentioned in last month’s commentary, US Fed Chairman Powell’s statement that the Fed was “listening closely to markets” on January 4th proved to be just what the market needed to stop panicking about the prospect of rising rates. The partial resolution of the US government shutdown added to positive sentiment, as did more positive dialogue regarding trade tariff negotiations between the US and China. As such, the S&P 500 (SPY US) rose +8.01%, Emerging Market equities surged +10.34% (EEM US) and Emerging Market bonds gained +4.78% (EMB US).

Emerging Market securities had a dreadful 2018, but we found it very interesting that they refused to put in new lows as US markets were crashing in December. We interpreted this price action divergence as very positive despite the nonsense going on in US markets, as Emerging Markets tend to be more volatile than US securities. Put simply, the fact that EM securities were actually showing strength implied that perhaps not all hope was lost. Thus far, catching this positive signal not ‘selling everything’ during December’s panic has proven to be a wise course of action.

Despite correctly analyzing this US –vs- EM price dynamic, experience dictates that such important price movements must be confirmed by subsequent data and anecdotal evidence. This is why we also mentioned is last month’s commentary that we would “be trying to determine whether the Q4 selloff and market panic matched the actual performance of companies across all sectors of the US economy.” We took strong positive signals from the major US banks, who - despite mostly missing revenue targets due to poor trading revenues - commented that the US consumer was in good health. These statements we subsequently confirmed across most sectors as earnings season progressed.

In terms of trading activity, we added Canada Goose Holdings (GOOS US), which had sold off heavily due to a diplomatic dispute between Canada and China. Pictures of a six-block line-up to get into the new Canada Goose store in Beijing at the end of December confirmed our suspicions that the Chinese consumer might not hold a grudge. We anticipate that Canada Goose will soon release a set of impressive earnings from last quarter.

We have stated in previous commentaries that volatility creates opportunities, but this is hard to appreciate when markets are crashing, and we are very thankful to our clients for sticking with us after such a traumatic December. January’s returns were more substantial than we could have realistically hoped for at the end of last year. That being said, we are by no means satisfied and continue to seek out new opportunities that will drive even better returns going forward.

On behalf of our Client Portfolio Management team, I thank you for your continued trust and support!

Pauls Miklaševičs

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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