The main contributor to first-half declines for my portfolio came from Compagnie Financièr Richemont, SA (XSWX:CFR). Richemont suffers from adverse investor sentiment over negative trends in Swiss watch sales. Pressure comes on such sales from crackdowns from Chinese officials to police recently abundant corrupt practices relating to gifts given for influence. Pressure comes as well from perceived threat from connected watches (cf., Apple Watch) which threatens to capture attention of millennials, formerly targeted by Swiss watch makers. I believe such fears are exaggerated and watch sales will recover to a successful level (albeit likely less than the frothy recent past levels of activity). I believe year-to-date declines in share prices of both Richemont and Swatch fail to adequately value their enormous respective collection of leading luxury jewelry maisons, Cartier and Van Cleef & Arpels for Richemont and Harry Winston for Swatch. I also believe that the share prices similarly discount their balance sheet strengths.
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From Tom Russo (Trades, Portfolio)'s Semper Vic Partners second quarter 2016 shareholder letter.
