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Thanks very much Kenster. A good read. I was a bit disappointed though that he didn't address his thoughts on valuations in emerging markets. As I recall in the 2nd quarter report he saw valuations as attractive. But the markets have moved higher over the last 45 days.
".... I made an error with a single position that weighed down returns by a bit over 1% during the quarter...." Refreshingly direct and candid. I own this fund, and when I have the cash to spare, I'll be adding to my position.
Love the data breakdowns he does; it makes it so easy at a glance to see what's going on with the portfolio.
That said, it was very disappointing to me to see AF put significant $ into materials stock. The core, well-considered value approach a la Matthews extended to the wider EM/global world is what I was investing in, and he (hopefully only briefly) abandoned said approach in that case.
As he says, it's very hard to figure good valuations for cyclical, high-cost extractive industries with so much dependence on commodity prices. Avoiding that type of investment for the most part is one of the main reasons his former company Matthews has generally avoided big drawdowns and has outperformed so consistently, with a big advantage in down markets. Plus, with commodities in a longer term downtrend, no hint of momentum change, and global growth not so great, it just was not a good macro time to be plunking down a chunk of change in that sector.
I applaud Andrew's openness about this, and I hope he sticks with the discipline and doesn't let it go again the next time he sees a bright penny on the sidewalk. In recent months I've rebalanced this house's EM-ish allocation a bit, somewhat away from SFGIX and toward WAFMX and MACSX.
Honesty of admitting a mistake is refreshing. I understand why he got into SQM and some of the things were not under control like longtime Potash cartel breaking up. That revealed other problems with the holding and especially the control party. I think he did the right thing by exiting SQM. Some times you have to take the loss and move on.
A lot of small cap value managers are doing this type of mistakes but not all of them are able to swallow their pride and say I was wrong and move on. For example, a lot of resource stocks owned by ARIVX manager did not pan out. Many may turn out to be value traps.
Comments
Love the data breakdowns he does; it makes it so easy at a glance to see what's going on with the portfolio.
That said, it was very disappointing to me to see AF put significant $ into materials stock. The core, well-considered value approach a la Matthews extended to the wider EM/global world is what I was investing in, and he (hopefully only briefly) abandoned said approach in that case.
As he says, it's very hard to figure good valuations for cyclical, high-cost extractive industries with so much dependence on commodity prices. Avoiding that type of investment for the most part is one of the main reasons his former company Matthews has generally avoided big drawdowns and has outperformed so consistently, with a big advantage in down markets. Plus, with commodities in a longer term downtrend, no hint of momentum change, and global growth not so great, it just was not a good macro time to be plunking down a chunk of change in that sector.
I applaud Andrew's openness about this, and I hope he sticks with the discipline and doesn't let it go again the next time he sees a bright penny on the sidewalk. In recent months I've rebalanced this house's EM-ish allocation a bit, somewhat away from SFGIX and toward WAFMX and MACSX.
A lot of small cap value managers are doing this type of mistakes but not all of them are able to swallow their pride and say I was wrong and move on. For example, a lot of resource stocks owned by ARIVX manager did not pan out. Many may turn out to be value traps.