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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Moerus delivered positive returns despite Growth stock dominance by avoiding expensive mega-cap names and focusing on undervalued opportunities. Financial Services and select Energy holdings drove performance while Latin America provided new investment opportunities."
The Moerus Worldwide Value Fund returned 2.81% in the first half of 2023, modestly lagging the MSCI ACWI benchmark's 3.45% return during a period dominated by mega-cap Growth and Technology stocks. Despite challenging conditions for Value strategies, the Fund generated positive absolute returns while avoiding expensive popular names on valuation grounds. Financial Services holdings were the largest positive contributor, led by well-capitalized banks outside the US and insurance companies that benefited from improving industry conditions. Energy holdings showed mixed results with Tidewater leading gains while oil producers declined on recession concerns. The manager initiated new positions in Latin American opportunities including LATAM Airlines and Natura, while completing profitable exits from NN Group and corporate activity-driven sales. Looking forward, the manager expects inflation to remain elevated due to structural factors including massive stimulus and deglobalization trends, creating an environment where fundamentals and valuation discipline should matter more than growth narratives. The Fund's focus on deeply discounted, well-financed businesses with strong balance sheets and ongoing corporate value creation activities positions it well for this evolving landscape.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
High conviction evidenced by concentrated portfolio with 35 named holdings, specific position sizing discussions, and detailed investment theses for individual companies. Manager provides clear rationale for avoiding popular names and explicit corporate activity catalysts across 36% of portfolio.
Growth Outlook
Manager expresses cautious optimism mixed with significant concerns. While acknowledging some positive developments, the letter emphasizes uncertainty about economic paths ahead, potential recession risks, and structural inflationary pressures that could persist.
Risk Appetite
Fund maintains selective long positioning in undervalued opportunities while explicitly avoiding expensive popular names. Manager shows willingness to add new positions in Latin America but emphasizes disciplined approach to risk management.
Capital Deployment
Moderate deployment activity with three new positions added (LATAM, Natura, Teck) while completing three exits (NN Group, Banco Itaú Chile, Yamana Gold). No cash level changes disclosed, but active rotation suggests selective deployment into more attractive opportunities.
Forward Guidance
Manager indicates continued focus on long-term fundamentals and selective deployment into discounted opportunities. Guidance suggests patience and discipline rather than aggressive deployment, with emphasis on waiting for attractive valuations.
Language Signal
Language balances opportunity identification with risk awareness. While discussing attractive valuations and corporate value creation, the letter frequently mentions uncertainty, volatility, and potential economic headwinds.
Perceived Risk
Manager identifies multiple specific risks including potential recession, banking crisis impacts, structural inflation pressures, and geopolitical tensions. Detailed discussion of uncertainty around economic paths and Federal Reserve policy decisions.
Opportunity Density
Manager sees selective opportunities particularly in Latin America and undervalued areas, but emphasizes the need for patience and discipline. Describes finding attractive opportunities in depressed areas while noting challenging environment for Value strategies.
Time Horizon
Explicitly long-term focused with stated investment horizon of five years or more. Manager emphasizes patience for corporate value creation to be recognized and willingness to hold through short-term volatility for long-term value realization.
