Dear fellow fundholders,
Greg Dean's blog
Several months ago Brandon and I returned from Brazil and discussed our excitement at the investment landscape that we saw emerging in the region at the time. You can read that piece here. While it was unpopular and definitely came with its share of uncertainty, we believed the country offered very compelling risk-reward over the long-term for those willing to be patient and ready to act when the stocks we wanted to own hit the prices we wanted to pay.
Just over four years ago we wrote about one of our core holdings – Brookfield Infrastructure Partners (BIP). Here is what we said:
Coincident with the launch of the Cambridge Income Fund, we wanted to highlight a name we’ve owned for some time but have recently been buying for this fund. Brookfield Infrastructure Partners is a $4B mkt cap “utility-like” stock that recently reported strong results.
As long-time readers and clients will attest, we have always viewed the active-share metric as a helpful tool in holding portfolio managers accountable to their value propositions. It helps investors cut through the “industry noise” and distinguish true active managers from expensive indexers posing as alpha seeking investors. You can read our prior musings here. Given the importance of this topic, we have written on it frequently over the years and share the table below with our clients on a quarterly basis.
Almost five years ago, I visited Brazil and met with over a dozen companies. My timing wasn’t very good from an immediate investment opportunity perspective. While I was able to establish what would become strong relationships with several management teams, decade-low interest rates and record interest among foreign investors made it very difficult to find great businesses at prices that were materially below their intrinsic value. Well what a difference five years makes! The Brazilian stock market is off more than 30% in local currency (70% in U.S.
Several team members and I spent the first couple weeks of May in Europe which proved great timing given the election results in the U.K. (more on that later). I wanted to highlight some interesting takeaways from our trip to Europe and provide an update on Cambridge Growth Companies Corporate Class.
Everywhere you look governments are trying to become more efficient
A topic that sits at the top of the risks ledger for me, and one that I’ve been following for a while, is the lack of liquidity and valuation in the bond market. I first wrote about it last summer. As a follow up to that, I wanted to share an interesting article that the Financial Times recently published on large global asset managers undergoing “shock-tests” of their bond portfolios.
Judging by the number of questions we have received from advisors and clients, it is clear that many of you are worried about oil prices and the impact it has on energy stocks. If you are looking for our take on this, I apologize but we don’t have a lot to say other than our strategy remains the same. We’re continuously searching for low cost producers with strong balance sheets who are managed by individuals with significant ownership positions and motivated to create shareholder value. We’re also making sure we don’t overpay for them.