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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Sandhill Investment Management 2023 Q2 Investor Letter | Buyside Digest

Back to Fund Profile (Sandhill Investment Management)

Primary Source Intelligence • Q2 2023 Letter Analysis

Sandhill Investment Management Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Sandhill Investment Management. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

Digest Analysis

Quick Take

"PM Capital delivered solid quarterly performance led by European banks and commodities, their two largest themes. European banks trade at significant discounts to peers while benefiting from rising infrastructure spending."

Executive Summary

PM Capital's June quarter performance reinforced their strategy of investing in high-quality, undervalued companies leveraged to attractive global themes. The fund's two largest themes by portfolio weighting are European banks and commodities. European banks are significantly undervalued relative to US and Australian peers, trading at circa 8x earnings, and could benefit from rising infrastructure and defence spending in Europe stimulating industrial activity and credit demand. In commodities, their longstanding view is that underinvestment in resource projects will constrain supply, supporting higher metal prices, while President Trump's use of commodities as bargaining chips creates additional supply barriers. Key contributors included European bank positions led by AIB Group, commodity holdings Newmont and Freeport, and gaming positions MGM China and Wynn Resorts. The portfolio's relative performance was boosted by US Dollar weakness. They continue to identify opportunities from the 'Great Decoupling' between the US and China, including reshoring trends benefiting companies like Siemens. A recovery in European banks and select commodity producers could take years to play out, necessitating patience.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

72%

CautiousHigh

High Conviction (72%)

High conviction is evident through concentrated themes (European banks as largest theme, commodities as second largest), specific position sizing discussions, and willingness to increase net invested position during volatility. The manager provides detailed thesis explanations for major holdings and demonstrates conviction through multi-year outlook statements, though the diversified portfolio structure prevents a higher score.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The manager expresses cautious optimism about specific themes like European economic revival and commodity supply constraints, but acknowledges significant market uncertainties including tariff wars, geopolitical tensions, and Federal Reserve independence concerns. The outlook is constructive on select opportunities but tempered by macro headwinds.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

The fund increased net invested position from 75% to 85% during the quarter, taking advantage of April market weakness to add new positions. This demonstrates selective risk-taking and opportunistic deployment, though they maintain active currency hedging and reduced energy exposure, indicating measured rather than aggressive risk appetite.

Capital Deployment

65%

De-riskingDeploying

Net Neutral (65%)

Clear evidence of capital deployment with net invested position increasing from 75% to 85% during the quarter. The manager initiated several new positions including Spectris, Diageo, Capstone Copper, Endeavour Group, and GQG Partners while exiting Shell and Coronado. This represents meaningful net deployment of approximately 10% of fund capital.

Forward Guidance

30%

CautiousExpansionary

Cautious (30%)

The manager indicates continued focus on identifying opportunities from the Great Decoupling theme and expects their European banks and commodities thesis to play out over years. They emphasize patience and discipline, suggesting selective rather than aggressive deployment going forward.

Language Signal

20%

BearishBullish

Bearish (20%)

Language is balanced with both opportunity and risk discussions. Positive terms include 'attractive valuations,' 'compelling opportunities,' and 'significantly undervalued,' while risk language includes 'uncertainty,' 'pressure,' and 'challenges.' The tone is measured and analytical rather than directionally bullish or bearish.

Perceived Risk

55%

Low RiskElevated

Moderate Risk (55%)

Moderate risk perception with specific concerns about tariff wars, Federal Reserve independence, geopolitical tensions affecting gaming and commodities, and energy price pressures from OPEC+ actions. Risks are identified and discussed but not characterized as systemic or extreme threats.

Opportunity Density

70%

ScarceAbundant

Abundant (70%)

The manager sees attractive opportunities across multiple themes and geographies, evidenced by adding several new positions during market weakness. They identify compelling valuations in European banks, commodities, and specific situations like Spectris takeover interest. The Great Decoupling theme provides a broad opportunity set for patient capital.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

Explicitly long-term orientation with statements that recovery in European banks and commodities 'could take years to play out fully, necessitating a patient, disciplined approach.' The recommended investment timeframe is seven years plus, and the manager emphasizes avoiding short-term market noise while focusing on compelling long-term opportunities.