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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Moerus delivered 7.90% returns in H1 2024 by investing in deeply discounted opportunities in Argentina and Turkey while avoiding overvalued mega-cap Tech. The unconstrained value approach generated strong absolute returns and outperformed international benchmarks despite Growth stock dominance."
The Moerus Worldwide Value Fund returned 7.90% in H1 2024, outperforming the MSCI ACWI ex USA (+5.69%) despite a challenging environment for Value strategies as mega-cap Growth stocks surged. The Fund's unconstrained approach enabled investments in depressed markets like Argentina and Turkey, which were the largest performance contributors. Argentina-based holdings led by Grupo Financiero Galicia benefited from early signs of economic stabilization under the Milei administration. Türkiye Sigorta continued strong performance as Turkish monetary policy normalized. New positions included Douglas Elliman (residential real estate), Hong Kong Exchanges (benefiting from depressed Hong Kong sentiment), and MEG Energy (oil sands producer approaching debt reduction inflection point). Brazilian holdings detracted due to negative sentiment toward the market and currency. The manager eliminated profitable positions in Tidewater, Spectrum Brands, and Nuvama following strong performance. Corporate activity remained a significant value driver across the portfolio. Looking forward, the manager believes the Fund is well-positioned for a higher inflation, higher cost of capital environment where fundamentals and valuation discipline should matter more than recent momentum-driven markets.
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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 positions in specific names with detailed investment theses, willingness to invest in volatile emerging markets, and explicit position sizing discussions. The manager names specific holdings, explains rationales in depth, and demonstrates conviction through adding to positions during volatility. However, diversified portfolio across multiple geographies and sectors prevents maximum conviction score.
Growth Outlook
The manager expresses caution about market conditions, noting that benchmark indices trade at rich valuations and are increasingly concentrated in highly correlated areas like mega-cap Tech. While not explicitly bearish, there's concern about elevated valuations and market concentration, with preference for areas priced for worst-case scenarios rather than perfection.
Risk Appetite
The Fund maintains a constructive risk posture by actively deploying capital into new positions (Douglas Elliman, HKEX, MEG Energy) while selectively harvesting gains from appreciated holdings. The manager demonstrates willingness to invest in volatile emerging markets and distressed sectors, indicating moderate risk appetite despite market concerns.
Capital Deployment
Moderate net deployment activity with three new positions added (Douglas Elliman, HKEX, MEG Energy) while three positions were eliminated (Tidewater, Spectrum Brands, Nuvama). This represents capital rotation and selective deployment rather than aggressive cash deployment or significant de-risking. No specific cash level changes mentioned.
Forward Guidance
The manager shows selective deployment bias, adding new positions in specific opportunities while harvesting others. However, there's emphasis on patience and waiting for attractive valuations rather than aggressive deployment, with focus on longer-term positioning rather than near-term market timing.
Language Signal
Language is balanced between opportunity identification and risk awareness. Positive terms around specific investments and corporate activity are offset by cautionary language about market valuations, economic uncertainty, and challenging environments for Value strategies. Overall tone is measured rather than directionally bullish or bearish.
Perceived Risk
Manager identifies multiple specific risks including higher interest rates pressuring Real Estate holdings, emerging market volatility, geopolitical tensions affecting commodities, and potential stagflation scenarios. Risks are discussed in detail with specific examples and potential impacts, indicating moderate to high risk perception of the current environment.
Opportunity Density
Manager sees selective but meaningful opportunities, particularly in areas others avoid like Argentina, Turkey, and Hong Kong. Three new positions were initiated, suggesting adequate opportunity set, though emphasis on selectivity and patience indicates opportunities require careful screening rather than being broadly abundant.
Time Horizon
Explicitly long-term approach with five-year-plus investment horizon stated. Manager emphasizes patience through cycles, willingness to hold through volatility, and focus on long-term value realization rather than near-term catalysts. Investment cases built around multi-year thesis development rather than immediate value recognition.
