Markets were highly volatile during the month in response to the buildup and outcome of the Brexit vote. The volatility and market dislocation opened opportunities for us to start building our portfolio at very attractive valuations.Read more
Correlations were high during the month leading most stocks to move in tandem. Leveraging our prior work, we took advantage when attractive businesses with favorable secular-driven tailwinds sold off past our buy target price. We were active in the markets as soon as they opened for business in Europe on June 24 and found several attractive opportunities. We’ve been adding to them since then and we feel excited about the future prospects for our portfolio.
All positions being added present extremely compelling risk-reward profiles for the next few years. Market volatility plays to the strengths of the Somar approach. Our views of each businesses’ long-term cash-flow generating opportunities are rooted in fact-based analysis leveraging, when possible, direct observation and Data Science. We stress test our assumptions under adverse scenarios and define entry points based on the resulting risk-reward. Therefore, when the market price starts pricing extremely adverse outcomes with limited support from the observable facts we have the confidence to step up and make investments with favorable asymmetric risk-reward.
Our operations worked flawlessly throughout the month. Trades settled and cleared as expected. Risk Management discussions were held before and after the Brexit vote. Processes for reconciling cash, positions and trades worked smoothly. We built redundancy in our operations so we can always trade even in the case of overflow due to a large event such as the Brexit vote. For example, we have redundant Execution Management Systems to trade from, which gives us backup trading capabilities.