June 2018 Portfolio Manager Review
This month, international markets responded to heightening economic sanctions between the U.S. and China and Brazil’s second month of sharp declines amidst high energy prices and uncertainty regarding upcoming elections. Investors expressed concern that the party would be less favorable for business and the market.
FWDI underperformed the MSCI EAFE Index in April with a return of -2.35% in NAV while the benchmark MSCI EAFE Index returned -1.22%.
Mounting concerns over U.S. - China trade tensions placed downward pressure on markets as well as geopolitical activity in Brazil. The digital advertising platform Criteo (CRTO) and the largest holding in the FWDI portfolio (5.5%) jumped a significant 36% in June after beating earnings and demonstrating strong signals from management. Melco Resorts (MLCO), an entertainment resort that makes up 3.5% of the FWDI portfolio, declined over 14% in the past month as Macau, the world’s largest gambling hub, saw revenues that fell short of expectations for another consecutive month.
|FWDB Holdings (as of 6/30/18)||Portfolio Weight||June Return (NAV)|
|CRITEO SA-SPON ADR (CRTO)||5.53%||36.02%|
|ANHEUSER-BUSCH INBEV-SPN ADR (BUD)||4.91%||7.66%|
|SILICON MOTION TECHNOL-ADR (SIMO)||4.84%||8.76%|
|FRESENIUS MEDICAL CARE-ADR (FMS)||4.31%||0.86%|
|ALIBABA GROUP HOLDING-SP ADR (BABA)||4.14%||-6.30%|
|SHIRE PLC-ADR (SHPG)||3.81%||2.78%|
|RYANAIR HOLDINGS PLC-SP ADR (RYAAY)||3.56%||-1.45%|
|MELCO RESORTS & ENTERT-ADR (MLCO)||3.48%||-14.27%|
|TENARIS SA-ADR (TS)||3.08%||1.36%|
For the month of June, no trades were made to reallocate the holdings of the FWDI portfolio.
Returns for the month closed in green for some industries and sectors and red for many others, but we at Madrona are confident in the ability of investors to recognize and follow signals of the fundamental drivers that drive sustainable appreciation. EPS and revenue growth across the overall global equity marketplace nonetheless remain strong despite mounting concerns over trade wars, as well as macro tailwinds in many countries. Unemployment rates and GDP continue to head in favorable directions in many regions, notably in Europe and Japan.
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 drive 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