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Mayar Fund Letter to Partners

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Mayar Fund Letter to Partners MAYAR FUND LETTER TO PARTNERS FOR THE QUARTER ENDING MARCH 31, 2015 OUR PARTNERSHIP PRINCIPLES WE WILL COMMUNICATE WITH YOU REGULARLY AND IN A STRAIGHTFORWARD MANNER. WE WILL NOT SUGAR- COAT OR EXAGGERATE THE TRUTH. WE WILL NEVER PROMISE WHAT WE CANNOT DELIVER WE HAVE A SUBSTANTIAL PERCENTAGE OF OUR NET WORTH INVESTED ALONG YOUR SIDE, AS DO MANY OF OUR FAMILY MEMBERS AND FRIENDS. REST ASSURED THAT OUR INTERESTS ARE ALIGNED WITH YOURS WE WILL MANAGE YOUR CAPITAL TO MAXIMIZE LONG- TERM RESULTS AND WILL GLADLY ACCEPT “BUMPIER” SHORT-TERM RESULTS TO ACHIEVE THEM WE WILL LOOK AT RISK BEFORE RETURN AND WILL IGNORE HIGH RISK OPPORTUNITIES REGARDLESS OF POTENTIAL PAYOFFS OUR STRATEGY BUY A GREAT BUSINESS AT A REASONABLE PRICE CUMULATIVE RETURNS SINCE INCEPTION ANNUALIZED RETURNS MANAGER’S HISTORICAL PERFORMANCE* *Actual results of the manager’s investment strate- gy including periods at predecessor funds PERFORMANCE DETAILS NET, EX IF NET MSCI World FY 2012 4.9% 2.9% -5.1% FY 2013 21.5% 20.9% 18.6% FY 2014 16.3% 16.3% 24.0% FQ1 2015 -0.3% -0.3% -2.2% FQ2 2015 3.4% 3.4% 1.0% FQ3 2015 3.2% 3.2% 2.3% FYTD 6.3% 6.3% 1.1% SINCE INCEPTION 57.6% 53.8% 41.1% NET, EX IF: Returns after deducting expenses and fees but before deducting incentive fees. This is the best number to use for comparison against the benchmark and is the basis for the calculation of the manager’s incentive fee NET: Net return due to fund series holder. This is the net amount that an investor in this fund series has realized over the period after deducting all expenses and fees. FY 2012: The fiscal year ending June 30, 2012. Mayar Fund's fiscal year ends on June 30th FYTD: Fiscal Year To Date FQ: Fiscal Quarter PERFORMANCE STATISTICS (SINCE INCEPTION) ANNUALIZED ALPHA 4.53 ANNUALIZED VOLATILITY 12.68 BETA 0.78 ANNUALIZED WEEKLY RETURN 12.70 R-SQUARED 0.84 TRACKING ERROR 6.00 SHARPE RATIO 0.83 UPSIDE CAPTURE RATIO 0.83 TREYNOR RATIO 13.51 DOWNSIDE CAPTURE RATIO 0.72 INFORMATION RATIO 0.45 BULL BETA 0.82 SORTINO RATIO 1.26 BEAR BETA 0.77 MY FELLOW MAYAR PARTNERS, OUR PERFORMANCE For the three-month period ending March 31, 2015 Mayar Fund is up 3.2%, net of expenses and management fees, but before incentive fees (up 3.2% net for the Initial Series). Over the same period its benchmark, the MSCI World Index, increased by 2.3%. Since its inception in May 2011, Mayar Fund is up 57.6% (up 53.8% net) versus a 41.1% increase for the MSCI, which corresponds to an 12.4% annualized rate of return for Mayar Fund, compared to 9.3% for the MSCI. GENERAL COMMENTARY There’s been a lot of discussion in the media recently about whether or not stock markets are overvalued. While some indicators suggest there might be some truth to that statement, you are all familiar with my approach by now: I do not believe that anybody can predict where markets will head over the next week, month, or year. In fact, with the exception of extreme cases, I don’t believe anyone can say with certainty whether markets are cheap or expensive. And while we have seen examples recently on both ends of the spectrum in the United States, in 2000 and 2008, those extreme cases are rare when we look at the past sev- eral decades. In all other cases it is extremely difficult to decide whether the market as a whole is expensive or cheap. Luckily, I believe you can still find success in your investments without wasting a great deal of energy trying to predict the future, or even fully understand the present. While every individual stock has a high correlation with the overall market in the short-term, long-term performance of individual stocks is more closely related to the underlying perfor- mance of the business and the valuation you pay at the time of your initial purchase (and time of sale). As a result, if you have a long-term view and can handle the interim volatility, buying great businesses at a reasonable price ness fundamentals. When we cannot find will generate satisfactory results for you. great companies to buy at a price that gives Will you have periods when your portfolio us a margin of safety, we are happy to sit on goes down by 20, 30, or even 40%? No cash and wait for such opportunities to pre- matter how intelligent and forward-thinking sent themselves. Eventually, they always do. your investments are, you’re practically guar- Over the past year and a half, those opportu- anteed to experience such a dip at least once nities have admittedly become scarcer, but during your journey. But if you remain pa- they still exist. This is evident in our ability to tient and stay focused on the end game (and invest significant amounts of our portfolio don’t sell when your portfolio drops) you will during this quarter. More specifically, we de- perform well in the bigger picture. As an ployed amounts equal to more than 8% of added bonus, you won’t have to panic with our net asset value (and a similar amount every abrupt shift in the market, you can last quarter). Our flexible mandate (global by stress less, and ultimately the pain of those geography and industry agnostic) and our seemingly-huge drops will fade from relatively small size give us tremendous ad- memory. vantages here compared to managers with What does this mean for us at Mayar? several billion under management. Unlike Truthfully, we put ZERO effort into trying to the large, lumbering firms whose expansive predict the valuation of the overall stock size sometimes translates to sluggishness, market or where it’s heading in the short we have the freedom to take advantage of term. Instead, we focus on two things: 1) smaller opportunities and act quickly on big- finding great businesses with durable eco- ger ones that show up only for brief periods. nomic moats that we would like to own for For example, back in January we increased many, many years, and 2) buying those busi- our investment in Swatch Group registered nesses only when the price offered is signifi- shares at a price that was available for less cantly below intrinsic value, giving us a mar- than a week--we’re up 15% in USD terms gin of safety on our purchase. After that, we since then—and during that week less than wait… for a long time. We wait and we ig- CHF 15 million worth of stock traded per day, nore the stock’s position. In fact, if we didn’t on average. As a result, if you wanted to stick need to keep an eye on our favorite stocks to, say, 20% of daily volume, the most you and buy more when the prices drop, we could’ve purchased during that period would would ignore our portfolio companies’ stock have been ~CHF 21 million. Let’s further as- prices altogether and focus solely on busi- sume that you wanted those purchases to fer sharing the details to a later date. Also comprise no more than 2.5% of your portfo- during the quarter, we sold our shares in lio. Those assumptions would limit the in- three companies: Reckitt Benckiser, realizing vestor’s portfolio size to roughly $1 billion, a total return of 59% over a period of less even though Swatch Group has a market than three years; PepsiCo, realizing a gain of capitalization of roughly CHF 23 billion. Other 58% over three years; and Becton Dickinson, companies in our portfolio have market capi- where we more than doubled our money talizations that are a fraction of that. This over three and a half years. We also sold our means that at some point in the future we shares in ADT Corporation at a small loss. will not be able to move as fast as we do While the business fundamentals continue to now nor take advantage of as many smaller improve, debt has increased to levels that opportunities. When that happens, years make us uncomfortable. Finally, we sold such as the one we just had, where opportu- some of our shares in Hanesbrands to take nities are not as plentiful or are fleeting, will advantage of more attractive opportunities. force us to maintain higher cash balances. I During the quarter, we initiated a new posi- do not know how soon that day will come, tion during the quarter in the common stock but I estimate that these considerations will of Evertec, Inc. Based out of Puerto Rico, become more relevant once our assets ex- Evertec’s operations focus primarily on pay- ceed US$1 billion. ment processing services, merchant acquir- ing, and miscellaneous business solutions. Operating in nineteen countries, the compa- ny is one of the leaders in all three business OUR PORTFOLIO lines in Latin America and the largest in the We added significantly to our investments in Caribbean and Central America where the Switzerland in early January, when panic hit company processes 2.1 billion transactions a year.. In addition, Evertec owns and operates the stock market on the heels of the Swiss the ATH network, one of the region’s leading National Bank abandoning its exchange rate PIN debit and ATM networks. You can find cap versus the Euro. We added to our shares more information about Evertec on their in Nestle, Swatch Group, and Richemont, website (http://www.evertecinc.com/) and taking Swiss stocks to 13.6% of our portfolio, in this informative video: https://youtu.be/ V7_HR9gm-Jo.
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