The second quarter was a positive one for the portfolios
Given that there are so many extraneous circumstances that have resulted in sharp moves on low liquidity we are pleased to report that we managed to stay away from any bad news stocks and tempered our enthusiasm for small caps which have been offering huge value but remain untradeable and thin. December 2017 was a lesson in not believing everything CEOs tell you — an expensive lesson, but one we will never forget.
The quarter was characterized by continued emerging markets sell off, rand weakening 16% against the dollar and 10% against the pound and the all share index is down close to 2% for the year. The amazing thing is that only 9 shares of the 40 are up and of these 7 are rand hedges so being in the correct sector again beat overall index performance.
The power of conviction
Donald Trump, Cyril and the ANC, Brexit and trade wars continue to make taking any fundamental macro view impossible hence the portfolios also only trading in very few counters over the quarter. We prefer to trade what we know rather than offering a generic buy a bit of everything and hope to perform similarly to the index, when asset managers are in doubt they tend to move to a quasi-index tracker as its easier to explain losses that way, here at Courtney we would prefer to be in cash than hold shares just because the equity model says so.
The emerging market sell off accelerated in the beginning of this quarter with the Turkish Lira showing down 22%, China Index 25% and Brazil Real down 14% for the year. EEM sell-offs generally pre-empt a world sell off. USA rate rises (the S&P now yields less than the 10 year for the first time in 9 years) means we will continue to be very conservative on the portfolios and hope by the end of the next quarter be able to report more positive returns.
The Courtney Capital Team