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Can smart Fund Managers create a permanent bull market in your portfolio? 

We absolutely believe they can! 

But first: Why is this question at all relevant?

Well, it is very logical for you to think that markets have gone up a lot and therefore, should you be investing right now or not? 

Many big and small investors have thought exactly like this in the past several months!

Of course, we have seen that markets have kept going up despite all the doubts and scepticism.

As a result of this hesitation, many, many Investors have lost the chance of a lifetime to make massive profits because their Wealth Management Company or Portfolio Management Services Company, failed to guide them on how to create a Permanent Bull Market in their portfolios. 

What is the solution, then?

Let's understand some key things first. 

1. There is nothing called a bull market or a bear market 

There is always a bull market and there is always a bear market coexisting at any point in time. 

What this means is that certain categories of investments will be in a bear market while at exactly the same time, certain categories will be in a bull market!

For example, in the last 10 years: 

  • Emerging markets were in a bear market while US markets were in a bull market. Despite, both being Equities! 

  • Overall, Equities were in a bull market while commodities were in a bear market. 

  • US dollar was in a bull market while Emerging currencies were in a bear market. 

  • In 2020, Indian IT & Pharma stocks had a massive bull market, while simultaneously, Indian Banking had a massive bear market (Bank NIFTY was up just 1-2% for the Year 2020!)

The point that we are trying to make is that of simultaneous Bull Markets and Bear Markets. 

They coexist. All the time.

It only takes deep understanding of markets, to understand this. And exploit it.

2. Smart, proactive Asset & Sector Allocation, coupled with tight, tactical Risk Management can indeed create a permanent bull market for your wealth. 

Do ask: is your investment manager or wealth advisor capable of understanding, and then exploiting these simultaneous, bull markets and bear markets?

Or are they just a one-trick, Equity-bull-market pony? 

Also, the question to ask is: how good is your investment manager at the business of managing risk while continuing to generate Returns.

Allow us to give you some examples of how we do things at First Global:

A.

In India, in the month of February last year, we saw plenty of dangers looming up because of the virus. 

As a result, we immediately took protective action through our Tactical Insurance for Portfolio Protection Strategy: TIPP Tech. And by buying Government treasuries. 

Our TIPP Tech saved our clients from a lot of damage in India as well as in the Global Stock Market.

From that point onward, i.e., March-end, we remained fully invested, riding the entire Bull market.

However, from the month of October, we started to buy a matrix of put options, via TIPP, again which was hedging at different points in time, different elements of our portfolio. 

Therefore, we kept capturing the upside that the markets gave us without running the risk of big losses.

B.

On the Global side where there are far better Risk Management and investment options available, it is so easily possible to diversify beautifully, across the world, into several uncorrelated asset classes, and individual stock Positions, that one can escape big meltdowns: just the massive range of choices available: 13,000 stocks, 100s of Fixed Income and REITs, dozens of commodities (previous metals, industrial, strategic like Rare Earth), all, when combined together into a perfect portfolio symphony, can capture most of available upside, without endangering portfolio safety.

And one can hedge each security, as well as a basket, too! 

Just imagine the flexibility on offer globally!

See how we did it in 2020: 

We moved away from our large American Technology stocks positioning around August last year and we increased our positions in Emerging markets and commodities.

As a result, we have had a very decent run even from the time that the NASDAQ became wobbly, with a flat-lining of major stocks like Amazon, Netflix, Facebook, Microsoft (these stocks have done almost nothing since August 2020!)

This is because we have had commodities that have done very well, we have had Bitcoin which has done very well, and we have had Global REITS that have done very well. 

Therefore, tactically, we left the ageing bull market in FAANG stocks and fully exploited the younger bull market building up in other asset classes. 

Further, our portfolios have been extremely well-balanced, with our overlay of TIPP Tech. 

Therefore we kept capturing most of the upside that was on offer across the world, without running the risk of suffering massive losses, should the market have fallen.

Hence, the way we do things at FG, whether in our India PMS or Global PMS and Global Fund, is completely different from the rest: we are extremely vigilant at all points in time and we keep adding layers of protection of risk management, on an on-going basis.

We always keep scanning the environment for durable shifts in trajectories of asset classes, sectors, countries. 

Then, by tactically hedging our portfolios, through a combination of TIPP Tech and Tightened Stop losses, we almost ensure that even if there is a massive crash, we don't suffer massive losses as other PMS and Funds routinely do. (Some losses can and will happen, of course. We are concerned only about big losses)

This creates sustainable portfolio returns, even if it means foregoing some extra upside, once in a while. 

Nobody minds that!

What should be your takeaway?

Simple: You just need to choose your Investment Manager or Wealth Advisor wisely and then leave the Tactical aspects like asset classes and sectoral allocation, the Risk Management, to that carefully chosen Investment Manager. 

And then only you can enjoy the full benefits that the market offers.

The best Fund Management & PMS Services companies should be able to deliver this tactical Risk Management, that smoothens out your portfolio returns, by prevention of massive losses, thereby creating a near-permanent bull market in your portfolio. 

If they can't ensure this, they don't deserve your wealth.

The key learning for you is that if your choice of investment manager is right, you have solved your entire problem completely with regard to the management of your money/ funds: if your investment manager has the capabilities to navigate good markets and bad markets, that's all the analysis & work you need to do.

For example, If this so-called liquidity-driven market collapses, is your Investment Manager or Wealth advisor already aware of this risk and have they done adequate, proactive Risk Management and sectoral diversification?

Investing Heaven is possible: one can participate in all the Bull markets that are happening in India and globally while not running the risk of massive capital loss: that is what this business of investment  & portfolio management skill is. 

So stop worrying about navigating markets. Stop worrying about whether markets are too high. 

Because that's what our job, as Investment Managers, is. 

And that's what we do the best in this business. 

And to end, this is how one can create a Permanent Bull Market: Smart proactive allocation, and risk management.

That's what Smart Money Managers or Fund Managers do.

We look forward to building steady and safe wealth for you.

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

From Your Friends at First Global

Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years

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Something interesting we thought we would draw your attention to: 

Our Human + Machine caught the Dollar Debasement Trade from mid-2020, and that is paying off big!

Our Machine caught an incipient US Dollar weakening right in the middle of the year: in hindsight, it seems pretty obvious, but six months back, we had people laughing at us.

That weak dollar move is now being spoken about, but we were several months ahead of the curve.

The data looming up for the combined Budget and Current Account Deficits for the US was staggering: it had no parallel in almost any sensible country, over 30 years at least.

So the trade was set up beautifully by mid-year.

The Man+ Machine Model Validation

2020 was an immensely satisfying year: it was about the most Perfect Validation of our unique Combinatorial+Human Machine Investment Model, Global Investing as well as India Investing.

We delivered 35-40% returns on our Global PMS, GMAAP, on our Global Fund, GFF, as well as India Investment Products, with around half the Market Volatility. (As we say time and again, the key is whether returns were delivered without raising blood pressure too much, ie, The Peace Ratio, which is Returns÷Blood Pressure).

What gives us immense happiness (just a bit, not a lot, because having a Zen like attitude is what we strive for, but we do give in to occasional joy): in 2020, we are in Top 9% of Global Funds, in terms of Performance, beating by a wide, wide margin, funds like Jim Simons', Ray Dalio, etcetera.

In India, we are right on top of the PMS pack, by being the Best PMS by far.

Our thinking in 2020

In 2020, our initial bets on Global Tech in March paid off big. Just as our sidestepping of the March crash, via increased bets on Treasuries, and via our TIPP Tech (Tactical Insurance for Portfolio Protection) Strategy. 

And then, we gradually built non- US dollar assets, from June, having spotted the debasement of the US Dollar, earlier than most. So Japan, Taiwan, Korea, Copper, Platinum, Palladium, later, Brazil, Russia, Bitcoin, all played their small roles in delivering us very good numbers.

Our Rare Earth play has been super, in 2020, one of our best in global markets. 

We also put on a small Allocation to Turkey: a market given up for dead, but interesting changes happening on the ground. And Turkey has done really well!

In India, we kept our cool through a late year rally in banks and leveraged financials: our cyclical bets were on steel, aluminum, some autos, cement, all of which again delivered reasonably well.

Our Approach: uncorrelated bets

Again, to underline our approach, we run strategies that take low/no-correlation bets: this ensures that we are generally positioned in the best areas of the markets but we aren't buying just one area of the market (e.g., tech), but directionally, an uncorrelated group of directionally outperforming stocks (think: BHP Billiton & Fiverr, JSW Steel and Infoedge. You get the drift)

In 2021, we will deliver more and better as our Models and Processes keep getting better every single day in the spectrum of portfolio management and wealth management (just last week, we stumbled upon some very interesting data patterns on Global Markets while running our data engines, all really exciting stuff!)

We look forward to putting our unique approach to investing, to work, building wealth for you everywhere. And keeping it safe, as well.

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

From Your Friends at First Global

Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years

Or WhatsApp us on +91 99206 71949

Chat soon!

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'These are not necessarily books on investing or stock market or even finance. But they will sure help refine your thinking edge or tell you something new.' 

 By Devina Mehra

Calendar 2020 is over, and what a year it has been! One of the few pleasures that wasn't hit by this year's turmoil was reading. 

Recently, someone asked me on Twitter about the best non-fiction I've read in 2020 and that set me thinking. Of the approximately 50 books I read this year, these are the ones that stood out (in no particular order). These are not necessarily books on investing or stock market or even finance. But they will sure help refine your thinking edge or tell you something new. 

1. The Halo Effect & Eight Other Business Delusions by Phil Rosenzweig: Among the best books on how our thinking fallacies derail us, especially on cause and effect in business and investing. A number of characteristics we attribute to successful companies and corporate leaders (great strategy, customer focus, outstanding human resource practices etc) are all mostly due to the halo that is cast by the current excellent performance of these companies. 

The corollary to that is that once performance goes down, suddenly the same strategies and leaders start to look not so good after all and plenty of holes can be picked in the very same attributes! 

This is the reason why many ‘how to’ books on corporate success (if you do this, this and this, you will achieve success) like In Search of Excellence, Good to Great that talked of outcomes and prescriptions, did not hold out in the real world. The companies mentioned in these, more often than not, underperformed in both operations and stock market in the coming periods. 

2. Alchemy: The surprising power of ideas that don't make sense written by Rory Sutherland, Vice-Chairman of Ogilvy's: 

The big insight of this book is that humans are less 'rational' than we think and hence 'illogical' advertising & marketing ideas can work brilliantly. 

Can changing the envelope in which you send a funding appeal for an NGO change the response rate? It can. 

Can restating the same facts differently change customer satisfaction even if nothing tangible changes in the product? It can. 

Too often we can be in the straitjacket of reason and logic where we are uncomfortable even with something that works when we can't explain why it works. The book gets you comfortable with trying something new - maybe even something that makes no sense! 

3. The Everything Store – Jeff Bezos and the Age of Amazon by Brad Stone

It is the Story of the building of Amazon. 

The Biggest takeaway: While the whole impression is of a great leader, Jeff Bezos and a linear growth rate for Amazon, the reality was very different. 

What actually happened was this: at every step of the way, Amazon took dozens of bets, lost a great deal of money in many of them and maybe one or two of them at every stage paid off. 

4. The CEO Factory by Sudhir Sitapati

This was one that I almost didn't read, as I have little patience with wooly, jargon-filled management & leadership tomes. 

But this has pretty usable stuff on the way Hindustan Unilever actually does things – from production to advertising. 

For example, they've discovered that targeting advertising is a wasted effort for most products and getting the maximum eyeballs is the way to go. 

Many insights of this sort. 

5. Confessions of a Pricing Man by Hermann Simon

A comprehensive look at pricing and the considerations that should go into it. 

From bundling/unbundling, impact of discounts to sales incentives, it is business through the prism of pricing. 

Written by a German ex-professor who has spent decades consulting in the field. 

Parts of it appear obvious when you think about them - as is often the case with a-ha moments in every field. 

6. The Man Who Solved the Market: How Jim Simons Launched the Quant Revolution’ by Gregory Zuckerman: 

The title is a bit of hyperbole, but the book is an interesting counter to more usual tomes on investing. 

It is about Jim Simons and the totally different approach to investing: of taking millions of bets with a small edge and a lot of computing power and where it led his firm. 

7. Talking to Strangers by Malcolm Gladwell

His books have always been well-written, but some of the earlier ones were thin on the ideas front. This one is quite insightful about implicit assumptions we make when judging others – these can lead us to take a too negative view at times and at others, make it difficult to spot a liar or a criminal. 

There are many Interesting asides into areas like what alcohol does to our judgment and memory. 

8. The Brass Notebook by Devaki Jain

Fascinating memoir of a woman far ahead of her times. Candid too! 

A very confident voice talking about her life and times which also touches a number of famous personalities from Amartya Sen to Gloria Steinem to Julius Nyerere. 

While her work as an economist is referred to only briefly, it still sets out how realities (especially, women's realities and those of the underprivileged) are often not recognised, named or dealt with by decision making. Easy reading. 

9. The Book of Indian Essays: Two Hundred Years of English Prose by Arvind K. Mehrotra

An eclectic selection from essays on Colonialism & the Dandi March to personal memoirs to one on the various cries through the day on Calcutta streets. 

Essays used to be great personal favorites in my youth - revisited after long. 

This year did not get around to read some other genres like history, travel and science. Let me cheat a bit by adding two from late 2019. 

10. The Early Indians by Tony Joseph

A book that is a must-read especially for those from the subcontinent. Absolutely Amazing!

Pulls together findings from archeology, linguistics, genetics and a few other disciplines for a very lucid account of how homo sapiens came to the subcontinent and their journey thereafter. 

Very accessible and easy to read. 

Even more impressive when one thinks that Tony was a business journalist and editor of 'Business World'. (Full disclosure: I used to write a column for him 20 years ago 😊)

11. Elephants on Acid and other Bizarre Experiments by Alex Boese: 

For those interested in the fun, or even wild, side of science like what would happen if you gave mega doses of LSD to elephants or would infants who are left to their own devices choose a well-balanced diet and others of this kind. 

The experiments are weird and bizarre as one would expect but many are thought provoking too!

Happy reading and a happier 2021 to you all. 

(A version of this article was first published in The Economic Times)

From the desk of 

Shankar Sharma & Devina Mehra

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

Or WhatsApp us on +91 99206 71949

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Our December '20 Performance

Global Funds' Performance: November '20

The First Global Global Freedom Fund - Global Tactical Strategies (FG GFF-GTS) is up 4.4% 

Our Global Portfolio product, the GMAAP is up 4.5%

Vs 

MSCI World that is up 4.4%

Global Funds' Performance: Calendar 2020 YTD 

FG GFF-GTS (US Dollar terms): +36.0%

GMAAP (US Dollar terms): +35.8%

Vs

MSCI World: +13.3%

The S&P 500: +15.3%

These numbers have come with relatively low volatility.

Annualised volatility has been around 22% for our products in this turbulent year versus 29% for the MSCI World and 37% for the S&P 500!

India PMS Performance: December '20

The Pure Equity India Super 50 (IS50) was up 4.4%

While NSE 500 was up 7.5%

The Asset Allocation India Multi Asset Allocation Portfolio (IMAAP) was up 3.1%

And CRISIL Moderate Hybrid Index was up 3.3% (this is our Benchmark for the IMAAP)

 India PMS Performance: 2020 YTD 

The IS50 is up 31.3%

Vs

NIFTY 50 that is up 15.4%

NIFTY 500 that is up 15.6%

We are now more than 16% ahead of the market YTD!

The IMAAP is up 16.5%

Vs

CRISIL Moderate Hybrid Index that's up 15.0%

Once again, we have done even better on a volatility adjusted basis.

The annualised volatility for IS50 is 19% as against 33% for the NSE 500 and nearly 35% for the Nifty. The volatility for the IMAAP is a mere 10.5% against 16.2% for the CRISIL Moderate Hybrid Index.

What was the one thought that kept us awake at nights from April, until September?

Contrary to what you might think, it was not the thought of a market crash. ( We think of that 24 hours a day anyway).

It was more the fact that we had successfully managed to dodge the crash of March, and had got the subsequent rally almost down to the day, from end-March.

And in getting everything right, a big component in this business of investing is not what you buy. 

It is what you don't buy.

Being in the right spaces in the market is absolutely the key to winning at this game.

By logical extension, avoiding certain areas of the market, is equally important.

These choices are what define investment management skill.

Therefore for us, the scenario that would give us most sleepless nights, was a rally in the “terrible" end of the market: banks, hospitality, travel. 

That nightmare became reality in November with the news of the vaccine.

So we had a rough November. 

But that's okay. These occasional periods happen. Counter trend rallies happen, are painful to live through, the good ones don't do well, the bad ones do very well. 

That's life. 

December, the game started righting itself. 

As it always does. 

Good guys win often. So do good stocks. 

And we have nothing but good-to-great stocks and securities in our portfolios.

You see, 2020 was a perfect year for validating the Human + Machine Model of Investing.

As data shows, Quant Funds generally had a bad year. Humans did better.

But that's not always going to be the case.

In the long run, The Machine will win. But you need the Humans to do two things: keep improving the Machine. And to step in, when the Machine gets befuddled.

Our Machine caught an incipient US Dollar weakening right in the middle of the year: in hindsight, it seems pretty obvious, but six months back, we had people laughing at us.

The data looming up for the combined Budget and Current Account Deficits for the US was staggering: it had no parallel in almost any sensible country, over 30 years at least.

All that meant only one thing: cut USD bets, increase bets elsewhere.

That's exactly what we did, right from June onwards. You would have noticed our increasing weights in commodities, in Emerging Markets, in strong currency markets like Taiwan, and so on.

That move is now being spoken about, but we were several months ahead of the curve.

As we generally like to be. Barring predicting when the vaccine would come out, that is.

Our Global Performance Analysis

December was satisfactory. 

Our shift away from the US Dollar, into non US Dollar assets, which started back in June- July 2020, started to bear fruit. 

Emerging Markets had a good run, our bet on Global Semiconductors (TSMC, Samsung, ASML, etcetera) worked excellently.

Our Strategic Bet on a Rare Earth company did really well too.

Our Bitcoin bet rocked. Clean Energy did very well as well. Our revival plays like Carnival and Ross had good outings too. 

Readers will know about our bullish commodities stance since April: we added to that. 

Turkey emerged as one of the far out bets one takes ( like Oil in March): forgotten market, given up for dead. 

And a catalyst of some interesting changes happening on the ground. Currency appreciating as well. 

All that's good enough (sometimes), for a reasonable upside. So we have Turkey. 

But what was most satisfying was our contrarian bet on Global REITs: most had a very good run in December. All had been crushed entire year, but we had them on our radar, closely watching them, seeing if their dividend checks were appearing on time. 

We can't resist this: our 2020 Performance puts in the Top 9 percentile of Global Funds. And bear in mind: with a vastly diversified portfolio, across the world, across asset classes, across currencies. So, a very low risk strategy, that didn't compromise on Returns. 

In short, our returns didn't come from just  buying Tesla and Apple. (We have had those too).

Our India Performance Analysis

India was a sweet month too. Not too sweet, but passable.

Our cement bets did really well.

Steel was steady to great.

Some of our IT services bets were quite amazing. For example, Persistent Systems has delivered 25% in a month. Sasken was another great one. Affle continued to deliver. 

Overall, we are fairly happy (total happiness happens only in a cocaine-induced state, and we aren't there. Yet), with the way we are positioned: a great mix of the old faithful and some vibrant, revival plays. 

Overall, we see a very strong 2021, for all the stocks we own.

It's going to be fun, so stay strapped! 

To reiterate, the way we do things around here are:

  • Avoid the Big Losses

  • Play Everything. Believe Nothing

  • Stay Hungry. Stay Hare-ish

Take a look at the Comparative Performance till December 2020.

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And our Human+ Machine delivers these Returns with the lowest possible risk.

As we've said before

We do not run "High Conviction" risk.

We do not run "Storification" risk.

We do not run "High Concentration" risk.

And yet we deliver. 

Or maybe, that's why we deliver.

That is the beauty of our proprietary Human+Machine investment model.

For those who aren't invested with us, but want in, just drop us a line on https://bit.ly/2V0RxAx and we will get in touch faster than the rally in Bitcoin!

By the way, you can also WhatsApp us on +91 99206 71949 

Chat soon!

From Your Friends at First Global

Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years

https://firstglobalsec.com

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Our November '20 Performance

Global Funds' Performance: November '20

The First Global Global Freedom Fund - Global Tactical Strategies (FG GFF-GTS) is up 0.6% 

Our Global Portfolio product, the GMAAP is up 2.7%

Vs 

MSCI World that is up 11.9%

Global Funds' Performance: Calendar 2020 YTD 

FG GFF-GTS (US Dollar terms): +30.3%

GMAAP (US Dollar terms): +29.9%

Vs

MSCI World: +8.5%

The S&P 500: +11.2%

These numbers have come with relatively low volatility.

Annualised volatility has been 22-28% for our products in this turbulent year versus 31% for the MSCI World and 39% for the S&P 500!

India PMS Performance: November '20

The Pure Equity India Super 50 (IS50) was up 5.1%

While NSE 500 was up 11.9%

The Asset Allocation India Multi Asset Allocation Portfolio (IMAAP) was up 2.8%

And CRISIL Moderate Hybrid Index was up 5.6% (this is our Benchmark for the IMAAP)

 India PMS Performance: 2020 YTD 

The IS50 is up 25.5%

Vs

NIFTY 50 that is up 7.1%

NIFTY 500 that is up 7.6%

We are now more than 18% ahead of the market YTD!

The IMAAP is up 13%

Vs

CRISIL Moderate Hybrid Index that's up 10.7%

Once again, we have done even better on a volatility adjusted basis.

The annualised volatility for IS50 is 19.3% as against 34.4% for the NSE 500 and nearly 37% for the Nifty. The volatility for the IMAAP is a mere 10.6% against 16.9% for the CRISIL Moderate Hybrid Index.

There are two ways to look at the month of November…

One is to wring one's hands in despair, saying "The Market is stupid". That's what amateurs do. 

The other way is to say "A rally in the beaten down Sectors and Markets across the world was very much on the cards at some point this year. It happens in every single year in which there has been a major dislocation. It does not mean that the market is stupid or irrational. It simply means that every dog has its day at some point in a market cycle. November was the month in which all the global dogs had their day.

Take a look at this data for November and year to date performance:

Best Performing Markets in November and their CYTD Performance

Sr No.

Indices

Country

$ Change 

Nov (%)

$ Change 

CYTD (%)

1

Athens General Composite

Greece

32.52%

-14.18%

2

Cyprus Main Market

Cyprus

31.08%

-21.02%

3

IBEX 35

Spain

28.20%

-9.86%

4

WIG20

Poland

27.66%

-14.50%

5

ATX

Austria

27.27%

-14.56%

6

Budapest SE

Hungary

26.11%

-14.47%

7

FTSE MIB

Italy

25.91%

0.24%

8

Bovespa

Brazil

25.53%

-29.15%

9

SET

Thailand

23.44%

-9.21%

10

BEL 20

Belgium

23.40%

-1.07%

11

CAC 40

France

23.02%

-1.67%

12

PX

Czech Republic

22.41%

-10.56%

13

BIST 100

Turkey

22.38%

-12.12%

14

Euro Stoxx 50

Germany

20.91%

-0.27%

15

RTSI

Russia

20.19%

-18.26%

The common theme? Almost all the markets that did well in November are actually among the major laggards for the Year!

It was pretty much the same story as far as sectors are concerned.

Best Performing Global Sectors in November and their CYTD Performance

Sr No.

Industry/Sector

$ Change

Nov (%)

$ Change

CYTD (%)

1

Energy Equipment & Services

30.21%

-33.99%

2

Aerospace & Defense

26.67%

-14.98%

3

Marine

26.36%

36.02%

4

Airlines

26.19%

-27.61%

5

Automobiles

24.26%

42.13%

6

Equity Real Estate Investment Trusts (REITs)

22.00%

-11.25%

7

Consumer Finance

20.66%

-2.95%

8

Transportation Infrastructure

17.86%

-12.54%

9

Hotels, Restaurants & Leisure

17.73%

-4.46%

10

Thrifts & Mortgage Finance

17.35%

-7.83%

 

As is amply clear, November saw a rally in all beaten down areas ("The Dogs") of the global markets: Emerging Markets, Aviation, Banks, Hospitality, Energy. 

And almost nobody sensible has had (or should have had) these sectors or markets this entire year!

Everything that worked till October, stopped working in November. 

Well, stuff happens in markets. 

Should we have played these laggards? Absolutely.

Could we have played these laggards?

Next to impossible.

 

Our Global Performance Analysis

If you folks recollect, we had a great October in which we closed up 2.1% in our First Global Global Freedom Fund - Global Tactical Strategies (FG GFF-GTS), when globally markets were down around 4%.

The way we managed to do this was simple: we cut the risk in our portfolio, we increased our cash positions and we kept some portfolio insurance. 

And in the first ten days of November these very strategies that helped us come out positive in October, turned savagely on us!

The first week of November saw the Biden Rally. A 6-7% rally in two days, based on an election outcome, that most thought, would be negative for markets. 

Well, we are nothing if we are not conservative: avoidance of significant loss is our overarching principle in investing. 

Now, look at how things looked before the US Election results came in. There was likelihood of a close election which could have stretched out uncertainty for months (this is what the options markets were pricing in). Then there was the possibility that markets would take Biden's coming as a negative given his stated stance on economic and taxation policies.

Before an event happens, decisions have to be taken based on the probability of various outcomes. 

Just because a low probability event: in this case a clear Biden victory and a Market Rally thereafter became a reality doesn't mean the decision to be conservative was wrong - more so when substantial gains had been made through the year which could be locked in rather than be risked further. 

And when we look back on the way we were positioned end of October, with the uncertainties around American elections, we would still have remained positioned exactly like that.

And then, exactly a week after that, came the news of the Pfizer vaccine. 

That changed the trade completely: Dogs became Gods. Gods became Dogs. 

Therefore essentially, November came down to just three days in which the market made a big up-move. 

And we sat out those days because of the fact that we were positioned very conservatively. 

How are we positioned right now?

Well, we have over the last 3 months, cut back on our US Technology exposure quite substantially. We do hold some that we like, like Fiverr, Upwork, Roku, Qualcomm, Square and some others. But we don't have Amazon, Netflix, Microsoft anymore. 

In the non-tech space, we have had Nike for a while, and that's been great. So have been FedEx, Sherwin Williams, and Target. An addition was Starbucks. 

Overall, our US exposure looks very good. Very balanced. 

Our exposure to Japan has been rising consistently since July. And we have been handsomely rewarded for it. Some stocks in Japan have terrific. 

And of course, we have core positions in Taiwan and South Korea, both of which, along with Japan, form our three largest country holdings. 

China has been okayish. The froth in Chinese tech has been becoming worrisome, and as you know, we worry a lot already. 

Overall, we remain conservatively positioned even now. 

In cricket, on tricky tracks, one doesn't look for runs. One looks to play out time, with minimal damage. This requires cutting out risky shots. It needs avoiding temptations. 

That's exactly how we are playing right now. After a mad 50-60% rally last few months, it's simply unwise to keep expecting a repeat of this, back to back.

Because, in investing, like in cricket, the ball does go soft. The pitch does ease up. The conditions do become more conducive to aggressive play.

But one can take advantage of these only if one has wickets in hand.

We are keeping our wickets in hand right now.

Our India Performance Analysis

India has been a classic Dog market all year. Actually, for the last few years. 

And so, in November, it had its day, with banks contributing most of the rally.

We fared reasonably well, keeping our heads down, and playing steadily without trying to play the downtrodden. 

A +5% November performance, without compromising on our morals/ principles, is just fine with us. 

And the cumulative Performance for the past three months, up ~ 10% is decent, keeping in mind that we have avoided the high beta end of the market completely. 

We have a great portfolio of excellent stocks that exhibit all the factors that we like.

 We are happy to remain chaste.

Despite the many temptations on offer.

Like in November. 

We are particularly proud of the relatively low risk of the portfolio - the volatility of IS50 is 19% vs 34% for NSE 500!

  • Avoid the Big Losses

  • Play Everything. Believe Nothing

  • Stay Hungry. Stay Hare-ish

Take a look at the Comparative Performance till November 2020.

 

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And our Human+ Machine delivers these Returns with the lowest possible risk.

As we've said before

We do not run "High Conviction" risk.

We do not run "Storification" risk.

We do not run "High Concentration" risk.

And yet we deliver. 

Or maybe, that's why we deliver.

That is the beauty of our proprietary Human+Machine investment model.

For those who aren't invested with us, but want in, just drop us a line on https://bit.ly/2V0RxAx and we will get in touch faster than the rally in Greece, in November!

By the way, you can also WhatsApp us on +91 99206 71949 

Chat soon!

From Your Friends at First Global

Trusted Financial Advisors to some of the world's largest Funds, Institutions & Family Offices, for 30 years

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November 9th is a day Investors won't forget in a hurry. Especially the successful ones this year. Because that's the day everything changed.

What worked beautifully in Investment Portfolios - basically growth investing - through the year 2020, suddenly stopped working.

What were disasters (investment-wise) through the year, suddenly became stars.

What was positive news for the real world, was almost doomsday for most Asset Mangers!

The crowded long trades in the beloved “Stay-at-Home” tech stocks, the comfort giving Pharma stocks, and the other stocks that have made some of us look good, tanked. 

In India, even before the Pfizer vaccine announcement, right from the beginning of October, the trade had started to shift, away from the "comfort" bets to the beaten down ones.

And what could be more beaten down than Banks, leveraged financials, airlines, hotels and such sectors, that the virus singled out for special treatment.

In India, from October, more than 100% of the 12-13% upmove in the NIFTY was accounted for, by a single sector: Banks.

Yes, more than 100%. Everything else, in aggregate, contributed a negative 1.3%!

But what's even more interesting is this: across the world, the exact same phenomenon was noticed, even before the news of the Pfizer vaccine hit the ticker.

Let's take a look at what the best performing sectors across the world were in the past 30 days. 

Global Industries - Gainers (MCap Weighted USD Returns)

Industry

Oct  - 16th Nov 2020

1M

3M

6M

YTD

Oil & Gas Equipment & Services

25.30

21.90

2.23

28.09

-35.29

Regional Banks

20.86

13.23

13.94

38.80

-9.00

Hotels, Resorts & Cruise Lines

20.77

22.51

20.39

50.55

-30.83

Oil & Gas Exploration & Production

20.72

16.03

-4.46

10.81

-34.65

Airport Services

20.59

20.68

17.22

37.01

-12.43

Airlines

18.42

17.64

18.39

45.70

-27.60

Diversified Banks

15.48

10.58

8.35

22.57

-13.99

Oil & Gas Drilling

10.65

8.42

-11.05

-3.40

-51.71

Data Source: Bloomberg

 

Global Industries - Losers (MCap Weighted USD Returns)

Industry

Oct  - 16th Nov 2020

1M

3M

6M

YTD

Health Care Technology

2.13%

-4.42%

7.10%

24.58%

73.02%

Systems Software

1.59%

-2.03%

4.62%

18.58%

34.12%

Internet & Direct Marketing Retail

0.95%

-2.96%

6.05%

36.43%

55.58%

Application Software

-0.72%

-5.40%

8.47%

31.57%

35.14%

Internet Services & Infrastructure

-4.94%

-9.40%

-0.35%

18.76%

80.87%

Interactive Home Entertainment

-6.35%

-4.74%

-4.03%

15.68%

31.71%

Data Source: Bloomberg

  • The above two tables refer to market-cap weighted USD returns of global sectors (from 110 countries) with a minimum market-cap of $500M. It is evident from the data that sectors which were hammered due to the COVID-19 pandemic related shutdowns, such as Energy, Airlines, Hotels/Restaurants/Resorts & Banks (down 30-50% on average) led the last 30 days rally. 

  • On the opposite end of the seesaw, the Technology, Software & Online Retail i.e. star performers (up 30-80% YTD) were the biggest losers.

  • We observe that out of all countries, Europe had taken the most beating lately amid an emergence of second waves and lockdowns being announced left, right & centre. Hence, who would benefit the most from a COVID vaccine? Yes, you guessed it right, European laggards i.e. 

  1. Banks

Global Banks (MCap Weighted USD Returns)

Country

Oct  - 16th Nov 2020

1M

3M

6M

YTD

Ireland

52.00%

42.12%

28.96%

72.36%

-50.57%

Spain

46.24%

46.33%

25.48%

52.27%

-25.48%

United Kingdom

35.45%

32.28%

19.29%

23.15%

-34.92%

Portugal

33.55%

37.46%

-0.12%

32.98%

-44.96%

Belgium

33.30%

28.29%

11.63%

47.32%

-11.32%

South Africa

32.38%

34.68%

51.03%

83.43%

-26.24%

Mexico

28.30%

14.90%

23.78%

38.40%

-20.59%

Brazil

28.22%

23.49%

12.43%

48.21%

-41.48%

France

27.97%

24.68%

6.46%

45.40%

-26.95%

Greece

24.13%

34.88%

17.84%

54.06%

-54.81%

Thailand

24.76%

25.69%

10.27%

20.57%

-29.95%

India

23.08%

14.85%

26.25%

44.22%

-19.13%

United States

22.64%

17.07%

12.74%

38.37%

-20.76%

Australia

20.22%

11.68%

12.28%

50.33%

-6.81%

China

11.47%

3.85%

4.54%

9.32%

-4.99%

Japan

9.38%

9.70%

7.50%

15.49%

-10.33%

Data Source: Bloomberg

  • Globally, European banks led the rally, gaining anywhere from +30-50%, but are still down 20-40% YTD! As math dictates, if you lose 50%, you need to gain 100% just to breakeven.

  1. Hotels & Restaurants

Global Hotels & Restaurants (MCap Weighted USD Returns)

Country

Oct  - 16th Nov 2020

1M

3M

6M

YTD

Ireland

56.89%

60.57%

43.09%

63.06%

-23.11%

Spain

48.35%

56.00%

26.33%

39.18%

-27.62%

Germany

46.32%

54.41%

32.87%

73.42%

-54.38%

Sweden

32.99%

37.58%

20.51%

70.64%

-37.02%

France

30.90%

33.42%

25.45%

59.43%

-23.16%

United Kingdom

30.12%

24.49%

18.91%

52.61%

-17.87%

United States

24.63%

25.83%

24.88%

58.33%

-37.88%

Australia

15.98%

19.80%

53.65%

99.67%

-34.27%

Data Source: Bloomberg

  1. Airlines

Global Airlines (MCap Weighted USD Returns)

Country

Oct  - 16th Nov 2020

1M

3M

6M

YTD

United Kingdom

71.85%

69.86%

35.92%

72.36%

-54.04%

Indonesia

54.47%

38.25%

36.68%

51.94%

-36.28%

Finland

51.59%

66.75%

28.56%

17.56%

-41.59%

France

49.98%

46.51%

13.99%

21.56%

-53.70%

Canada

31.71%

32.71%

23.08%

57.70%

-53.85%

Australia

28.24%

27.56%

44.16%

77.21%

-23.81%

New Zealand

22.74%

17.61%

33.96%

61.26%

-40.98%

United States

20.09%

17.51%

23.76%

88.90%

-35.23%

Hong Kong

19.94%

11.02%

16.46%

-16.75%

-35.73%

Data Source: Bloomberg

  • A similar trend is observed amongst Hotels, Restaurants and Airlines, Europe & UK leads the way, with airlines still down 54% YTD even after the eye-popping 72% surge in the UK from the 1st of October.

So what does this tell us?

Well, the first thing it teaches us is that in Fund Management, portfolio management, asset management, no theme is permanent.

The best Portfolio Management Services companies can and will change their strategies, their asset allocation, a bit ahead of the change in trend.

Because in investing, what gives maximum pleasure, one day, gives maximum pain as well.

The other thing that we learn is that, markets are connected globally, and that having a global thinking and global outlook is invaluable even when doing single country investing because one is able to view the world as a giant Jigsaw puzzle with each piece fitting nicely into the rest. 

Therefore global investing cannot be divorced from local investing.

Investing globally and investing locally are joined at the hip.

Investing is one single science. In order to be a complete and consummate investment management company, one needs to be able to understand every single moving part in the world.

From the desk of 

Shankar Sharma & Devina Mehra

If you want any help at all in your wealth creation journey, in managing your Investments, just drop us a line via this link and we will be right by your side, super quick!

Or WhatsApp us on +91 99206 71949

Chat soon!

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