2015-H2

The market

During the summer, the market downturn has surprised many speculators. The decline was driven by a more conservative forecast of the economic growth. The market recovery at the end of the year was guided by the ECB. However we feel that the ECB interventions are more cautious in order to keep some margin to support the economy.

Our portfolio

During the summer decline, the market offered a small number of opportunities. We took advantage of the market weakness to acquire an industrial company coming out of a long and controversial reorganization, which pushed the price of its shares under its future potential. The second part of 2015 was rather active. We sold three companies on the market rebound. Several of our investments are being coveted by buyers; we acted on a case by case basis to maximize our capital gain. Our index options have delivered effective protection of our capital. This allowed us to steadily achieve our gain, despite market volatility. However, the positive performance has hidden some disappointments in our natural resources investments. The collapse in commodities has not been the main driver of our setback. Our drawback is due to unfair capital allocation by our producers, which has as a result drop the earning potential and forced us to realize some losses. Consequently our allocation to natural resources is refocusing on our precious metals bucket. Our value investing style is aiming companies that are coping with past mistakes which are penalizing business activities, as we believe past errors can be adjusted with absolute commitment by the company, enduring patience by investors and required capital. In addition we invest in those companies only if we think that the management is fair to shareholders and we avoid them if they are untrustworthy.

Going forward

Our capital allocation is getting more defensive with the world economy still looking for self-sustainable growth. Our cautious positioning has not penalized us this year, on the contrary we find ourselves in a strong position to invest in new challenges. We have identified several potential acquisitions, mainly in services to exploration and production; we are ready to invest as soon as their financial strengths will be improved.