Upgrading Our Portfolio – September 2017

Upgrading Our Portfolio

Somar’s mission is to support the financial success of our investors by investing their capital in businesses
with both a leading customer-value proposition and a large market opportunity ahead.
We find attractive opportunities in underfollowed companies that have outgrown Venture Capital’s sweet
spot but that are not yet big enough to be ETF-owned.
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Fact-based vs. Opinion-based Investing – August 2017

Fact-based vs. opinion-based investing

“When my information changes, I alter my conclusions. What do you do, sir?” – John Maynard Keynes

One of the hardest and most profitable skills to develop as an investor is the ability to be open to new information and to change one’s mind when new information alters one’s previous conclusions. At Somar we have improved our returns by leveraging new information to change long positions into shorts and short positions into longs. To develop this skill, we had to overcome 3 barriers:

  • Confirmation bias
  • Commitment and consistency bias
  • Ego
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Mistakes… I’ve Had a Few – July 2017

Mistakes… I’ve had a few

At Somar we strive daily for continuous improvement to make sure the portfolio at market close is more compelling and has more upside than the portfolio at the start of the day. We use several tools for this: talking with management, direct observation, data science, reading, observing other people’s mistakes and analyzing our own mistakes.
This month we will share what we learned from some of the mistakes we’ve made since inception. After reading this letter you may be surprised how we have been able to deliver returns despite so many mistakes. That speaks to the quality and upside of the opportunities we are finding. We have found more attractive opportunities in the last 3 months that at any time in the life of the fund. That is a topic for another letter…
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Golden Age of Investing – June 2017

Golden Age of Investing

Over the first half of 2017 we added several new secular winners to our portfolio. The pace at which we
have been doing that has been accelerating which speaks to the quality of the opportunity set ahead of us.
Our estimation of the portfolio’s risk-reward now stands at an all-time high [please read our April 2017
letter for a description of this internal metric].
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Somar Turns 1 – May 2017

Somar Turns 1

One year ago, we partnered to start the Somar journey. 12 months later we are off to a good start and look forward to the future with strong confidence. My conviction that Somar will deliver superior risk-adjusted returns to our investors has never been higher: our performance is ramping up nicely; we have a highly professional, cohesive and committed team; and a stable and growing group of investors.
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A Personal Story – April 2017

A Personal Story

My dad is a medical doctor. He started his career in a hospital, working all night at the emergency room.
His passion was serving as a community doctor. Therefore, when I was 10, he moved our family to the
Portuguese countryside and built his practice there. Every day he put in long hours: leaving home by daylight
and coming back for dinner at around 8PM. Most nights, he would see patients after dinner at our house and
occasionally he drove at night to do domicile consultations. He built a stellar reputation: one of my
schoolmates’ family told me that my father saved the life of his grandfather. It is hard to overstate how
proud I am of him.
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Portfolio Construction Process – March 2017

Portfolio Construction Process

We believe Somar’s portfolio management process is accretive to our returns. Our process allows us to

  • Quantify and monitor our expected portfolio performance for the next 12 months
  • Easily weigh trade-offs between opportunities and risks among different industries and geographies
  • Use market volatility to our investors’ advantage by sizing up positions on weakness when their risk-reward improves and harvesting positions on strength as their risk-reward declines
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Small is Beautiful – February 2017

Small is Beautiful

Since the beginning of 2017 a combination of our performance and the addition of new investors has seen Somar cross the $20mn AUM mark. Currently, we are approaching the mid 20s. We are encouraged by our momentum and the confidence that you, our partners, have placed with us.

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Idea Generation: International Diffusion of Secular Change – January 2017

Idea Generation: International Diffusion of Secular Change

One consistent source of idea generation for Somar is the diffusion of secular change across borders. We study the winners and losers in the area where the change originated and leverage those learnings to other geographies giving us an early read into opportunities for longs and shorts there.
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Investment Strategy: Our Opportunity – December 2016

We are not happy to report these results, as the performance falls short of what we expect from Somar and the businesses we invest in. We have analyzed the causes of this gap and concluded the following:

  • Operationally the businesses are performing well, meeting or exceeding our expectations
  • There has been no single or small group of positions that caused the underperformance
  • Short book has performed well, with a marginal loss in a rising market1
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