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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Blue Tower returned 14.10% in Q1 2023, exiting homebuilders ahead of recession concerns and buying Charles Schwab during the banking crisis. The manager sees Schwab as a high-quality business trading cheaply at 11.3x forward earnings, planning to add on weakness while Russian holdings remain sanctioned but performing."
Blue Tower Global Value returned 14.10% net in Q1 2023, driven primarily by recovery in Sberbank and Meta Platforms holdings. The manager exited homebuilder positions Lennar and D.R. Horton due to rising interest rates causing contract cancellations to explode and construction backlogs to shrink significantly. The proceeds were used to purchase Charles Schwab shares, which dropped during the 2023 banking crisis. The manager views the inverted yield curve as historically signaling a probable 2024 recession but believes Schwab represents a high-quality business that will survive the current crisis and thrive long-term. At current valuations with a forward PE of 11.3, Schwab offers attractive risk-adjusted returns. The position remains small initially, with plans to add on further weakness. Russian investments including Sberbank remain frozen under sanctions, though Sberbank recommended a dividend that will be held in escrow. The manager maintains a long-term value approach, seeking quality businesses at discounted prices during periods of market stress.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
The manager demonstrates moderate-high conviction through concentrated moves (full exit of homebuilders, new Schwab position), specific valuation analysis (11.3x forward PE), and clear thesis articulation, though hedges with small initial position sizing and scenario planning.
Growth Outlook
The manager explicitly expects a probable recession in 2024 based on the most inverted yield curve since 1981, discusses the banking crisis creating systemic risks, and positions defensively by exiting cyclical homebuilders.
Risk Appetite
While the manager is cautious overall, they are selectively deploying capital into Schwab during the crisis and maintaining exposure to recovering positions like Sberbank and Meta, showing measured risk appetite in specific opportunities.
Capital Deployment
This represents capital rotation rather than net deployment - proceeds from homebuilder sales funded Schwab purchases. The manager explicitly states Schwab position is 'relatively small' initially, indicating cautious deployment pace.
Forward Guidance
The manager plans to add to Schwab on further weakness and expects the business to thrive long-term, but maintains a small initial position size and acknowledges the banking crisis could worsen, showing cautious optimism.
Language Signal
Language includes risk-focused terms like 'banking crisis,' 'impending recession,' 'explode higher,' and 'significantly worse,' balanced against opportunity language like 'attractive,' 'cheap,' and 'high forward rate of return.'
Perceived Risk
The manager identifies multiple systemic risks including the most inverted yield curve since 1981 signaling probable recession, banking crisis with potential bank failures, and acknowledges the crisis could become 'significantly worse.'
Opportunity Density
The manager finds selective opportunities like Schwab during the banking crisis but overall tone suggests limited opportunities, with defensive positioning and focus on avoiding impending recession impacts rather than broad deployment.
Time Horizon
The manager emphasizes long-term value investing approach, states Schwab investment is not based on next few quarters but long-term business quality, and shows willingness to build positions over time through volatility.
