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| Quarter | Letter Date | Fund Name | QTD | YTD | Tickers | Themes | Quick Take |
|---|---|---|---|---|---|---|---|
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"Milano's fund suffered two total losses from circle of competence violations but maintains conviction in First Pacific Company, a Hong Kong conglomerate trading at massive discount to intrinsic value. Through dominant Indonesian noodle business Indofood and Philippines infrastructure assets, FPC offers 200%+ upside potential at current 3x P/E valuation."
Diego Milano's fund returned 4.6% year-to-date through September 2023, underperforming the S&P 500's 11.8% but outperforming the Hang Seng's -10.0% decline. The portfolio trades at a look-through P/E below 2.5x on normalized earnings. Two positions became total losses this year: IOG Plc, a North Sea gas company that failed to achieve production, and Universal Entertainment SPAC warrants that became worthless when the Okada Manila casino deal was canceled due to legal disputes. Both investments violated the manager's circle of competence, costing over 6% in permanent losses. The largest position is now First Pacific Company, a Hong Kong-listed conglomerate with Southeast Asian operations trading at less than 3x P/E. Through its stakes in Indofood (world's largest noodle company), Metro Pacific infrastructure, PLDT telecom, and Singapore power generation, Milano estimates FPC's intrinsic value exceeds 3x current market price. The manager emphasizes learning from mistakes while maintaining conviction in core holdings that offer significant upside potential.
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Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.
Market Conviction
High conviction demonstrated through First Pacific becoming one of the largest positions with detailed intrinsic value analysis showing 3x upside. Manager provides specific valuation metrics and sizing rationale, though hedged by acknowledgment of past mistakes and need for discipline.
Growth Outlook
Manager shows mild optimism about specific opportunities like Philippines casino recovery and noodle market growth potential, but acknowledges challenging market conditions and the need for selectivity. The outlook is constructive but measured.
Risk Appetite
Portfolio positioning reflects moderate risk appetite with concentration in First Pacific as largest position, but manager has become more cautious after suffering two total losses and emphasizes staying within circle of competence.
Capital Deployment
Net slight de-risking as two positions went to zero representing over 6% permanent losses. While First Pacific was increased to become a largest position, the overall portfolio experienced net capital destruction rather than deployment.
Forward Guidance
Manager expresses intention to continue focusing on core positions like First Pacific while being more disciplined about avoiding unfamiliar investments. The bias is toward maintaining current positioning rather than aggressive deployment.
Language Signal
Language balances opportunity recognition (describing FPC's significant upside potential) with risk acknowledgment (detailed post-mortems of failed investments). Slightly more constructive than cautious overall.
Perceived Risk
Manager demonstrates heightened risk awareness through detailed post-mortems of two total losses, explicit discussion of circle of competence violations, and acknowledgment that permanent losses should be minimized. Risk perception is elevated but not extreme.
Opportunity Density
Manager sees selective opportunities, particularly in Asian conglomerates like First Pacific, but emphasizes the need for discipline and staying within competence. Opportunity set is characterized as requiring careful selection rather than being broadly abundant.
Time Horizon
Multi-year investment horizon demonstrated through holding First Pacific through various corporate actions and focusing on long-term value realization. Manager discusses businesses like Indofood's growth potential over years and shows patience for conglomerate discounts to narrow.
