Our YTD performance for 3Q2023 closed at approximately 26.25%, slightly lower than the previous quarter. Our portfolio rose initially before the downdraft in September that effectively erased all the gains of the summer.

Even though we focus on selecting businesses that we believe will deliver superior long-term value, we are not immune to the macro risk that surrounds us.  The major macro factors are:

Firstly, rising US Treasury yield. Until the end of July, the 10-year treasury yield had by and large remained anchored at below 4%. However, yield began rising post the 26th of July FOMC meeting where a hawkish pause was clearly demonstrated by the Fed. The market had started to digest the higher-for-longer risk that naturally brought down the equity market.

Secondly, in September, the political drama in Washington was back when Congress failed to pass a budget bill. To fund the government, the Senate had to pass a stop-gap bill for 45 days until the 15th of November. This led to a dramatic 100 basis points increase in the 10-year Treasury yield, with 60 points increase only in the last three weeks of September.

Amidst the volatility, we saw some opportunities in the quarter. In fact, we were the most active in the month of September in trying to capture the opportunities that presented itself.

Some notable changes that took place include exiting completely our position in AirBNB as we took profit opportunities in its inclusion in the S&P 500 index while at the same time, we believe there will be regulatory headwinds to its business that might be significant.

We slowly built a new position in Crowdstrike Holdings. We think that it has competitive advantage in cyber security especially in endpoint with their cloud-native architecture. We have also increased our position in Adyen. We believe that the sell off in the company is overdone and that created an opening for us. We believe that the market was too focused on the short-term cost increase (that had been communicated well before) but neglecting the strength of its unique unified commerce merchant acquiring platform in a very big global payments systems market. While the macro variables dominate the short-term price moments, we are confident that the companies in the portfolio will continue to benefit from their strong operating metrics and growing markets for their products and services.

30 Sep 2023