The portfolio returned 2.76% in the first-quarter of 2016 and underperformed the comparable indices.
The best performer was EasyJetÂ (LSE:EZJ, Financial), which returned 12.27% after dividends. The timing of my EasyJet addition to the portfolio in February was incredibly lucky. The worst performer was Syntel (SYNT, Financial), which plummeted after disappointing first-quarter guidance. I sold off Target (TGT, Financial) after the disappointing earnings report and its new "strategy." At the right price, I'll be happy to own Target once again. Cash position in the portfolio fluctuated throughout the quarter but closed out at 45%.
Individual security updates
I added EasyJet this quarter; I did not post this because it's a European company, but the thesis is available here for anyone interested. The pound sterling sits at $1.29. I am no forex expert, so I don't know where the sterling is headed. What I do know, however, is that if the pound remains stable (~$1.23), EasyJet can recuperate some of the Brexit-fueled-sterling-depreciation lost income when the $1.23 level laps in the October quarter. If the sterling runs higher, the company would recuperate the lost income and then some because it receives the money ahead of time and would hence end up with lower expenses. In summary, falling pound ($1.13), profits remain stable relative to last year; medium pound ($1.23), lost income from the past year is recuperated; stronger pound ($1.3-plus), profits rise significantly because of the income/expense characteristic of the consumer airline I outlined in the EasyJet thesis.
EasyJet Traffic Statistics (Source: EZJ IR)
The traffic stats so far this year are quite compelling – load factors and passenger numbers are all higher year over year. The stats would mean nothing, though, if the company used overly promotional tactics (i.e., unreasonably lower ticket prices) to attain them. The company's first-half report is due in the second week of May.
Rocky Mountain Chocolate Factory
I added Rocky Mountain Chocolate FactoryÂ (RMCF, Financial) to the portfolio, and the thesis is available here for anyone interested. The Trump administration laid out its tax plan this week with a proposed 15% corporate tax rate. Rocky Mountain Chocolate Factory's tax rate is among the highest in the country so it stands to benefit significantly from tax reform.
I sold off Target after its earnings report. Management's new strategy didn't make much sense to me so I decided to cut my losses and part ways with the stock. I'm willing to take a new position at a lower price, though. The update is available here for anyone interested.
Syntel's fourth-quarter earnings report was quite disappointing. Management guided to lower earnings because of the uncertainty its clients in the Healthcare and Financial industry are facing. It was disappointing, but one would be hard pressed to find a business with defensive characteristics in this market that trades at a reasonable valuation. It recently reported earnings for the second quarter – I will publish a post regarding the second quarter this weekend.
I sold off Walmart (WMT, Financial) for modest gains. Blue chips such as Walmart tend to be efficiently valued; mild deviations from fair value self-correct rapidly. I'm willing to take another position if the stock treads the low 60s again.
I'm still working on a post for Gattaca PLCÂ (LSE:GATC, Financial), which I added last month. Syntel and Mind C.T.I. have also reported earnings. I should have all those up by this weekend if time permits.
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