September 2018 Portfolio Manager Review
During the month of September, international markets responded negatively to heightening economic sanctions between the U.S. and China and unstable trade negations regarding NAFTA.
FWDI underperformed the MSCI EAFE Index in September with a return of -0.61% in NAV while the benchmark returned 0.87%.
Mounting trade tensions between the U.S. and China continued to place downward pressure on markets; however, successful NAFTA negotiations ending raised investor confidence. BP PLC (NYSE:BP) was a bright spot in FWDI’s portfolio returning 7.51% for September. BP’s returns are fueled by an 8.7% increase in oil price combined with BP being awarded 50% of Brazil’s Pau Brasil offshore oil fields. Another highlight in FWDI’s top ten holding is Ternium SA ADR (NYSE:TS) which delivered a 7.41% return for the month due to in part by the ability of Mexico’s newly elected President Lopez Obrador acting as a pivotal member for NAFTA’s successful negotiations.
FWDI was held back primarily because Silicon Motion Technology ADR (NYSE:SIMO) and Alibaba Group Holdings SA ADR (NYSE:BABA). SIMO produced a return of -8.83% while BABA’s returned -5.88% because of the downward pressure caused by U.S. and China trade disputes.
|FWDB Holdings (as of 9/30/18)||Portfolio Weight||September Return (NAV)|
|ROYAL DUTCH SHELL-SPON ADR-A (RDS/A)||4.38%||4.46%|
|BP PLC-SPONS ADR (BP)||4.28%||7.51%|
|ROYAL DUTCH SHELL-SPON ADR-B (RDS/B)||4.26%||5.27%|
|SILICON MOTION TECHNOL-ADR (SIMO)||3.92%||-8.83%|
|TERNIUM SA-SPONSORED ADR (TX)||3.77%||7.41%|
|TENARIS SA-ADR (TS)||3.67%||-0.06%|
|VEON LTD (VEON)||3.55%||0.00%|
|ARCELORMITTAL-NY REGISTERED (MT)||3.52%||2.15%|
|EQUINOR ASA-SPON ADR (EQNR)||3.28%||9.43%|
|ALIBABA GROUP HOLDING-SP ADR (BABA)||2.96%||-5.88%|
Returns for the month had a mixture of both positive and negative throughout FWDI, but we at Madrona are confident in the ability of investors to recognize and follow signals of the fundamental drivers that move sustainable appreciation. While U.S. unemployment rates fell to constant at 3.8% and global GDP continues to remain favorable, notably in the U.S. and China. EPS and revenue growth across the overall global equity marketplace nonetheless remain strong despite mounting concerns over trade disputes.
While risks of escalating economic sanctions between countries threaten future economic expansion, we believe that the historically healthy international business environment will be conducive to continued expansion. We believe investors should remain focused on the long-term growth from fundamentals that will promote continued appreciation. We look forward to the months to come and hope to continue our mission of generating globally-diversified returns for FWDI investors.
The Madrona Funds Portfolio Management Team
Portfolio Manager of FWDI