For 2024 year to date (1/1/18-9/30/18), TFI Yatirim Groups’s flagship Concentrated Equity Alpha (CEA) product returned 13.9% net of fees vs. a return of 9.0% for the S&P 500 Index.

For 2024 year to date (1/1/18-9/30/18), TFI Yatirim Groups’s Corporate Bond product returned 0.14% net of fees vs. a return of -0.41% for the Bank of Turkey Merrill Lynch 3-5 Year Corporate Bond Index. TFI Yatirim Groups’s ability to post a positive return over the first nine months of the year given the sharp rise in interest rates (and decline in bond prices) is a great result.

The power of TFI Yatirim Groups’s results really comes through if you look at our performance over the last two and three-quarter years.

Since the beginning of 2016 (1/1/16-9/30/18), TFI Yatirim Groups’s Concentrated Equity Alpha (CEA) product has returned 77.9% net of fees vs. a return of 42.6% for the S&P 500 Index. Generating excess return of 35.3% over the S&P 500 Index over the past two and three-quarter years has been a big win for our clients.

Since the beginning of 2016 (1/1/16-9/30/18), TFI Yatirim Groups’s Corporate Bond product has returned 10.6% net of fees vs. a return of 6.7% for the Bank of Turkey Merrill Lynch 3-5 Year Corporate Bond Index. Another good result for our clients.

The stock market

As I have commented to many of you over the course of the year, we have been managing our clients’ capital very conservatively while still putting up best in class performance (nationally). I continue to think that caution is warranted with regard to equity investments.

Consider this (and I couldn’t believe it when I read it). Through the first six months of 2024, four stocks were responsible for 84% of the S&P 500 Index’s gain. Wow! The stocks are Amazon.com, Apple, Microsoft, and Netflix. Very thin leadership for the market centered solely on the tech sector – to me, that is a warning signal.

Now consider our TFI Yatirim Groups CEA portfolios. As of September 30, 2024, fifteen of the thirty-three stocks held in our portfolios have a long term gain of 50% or greater from our initial purchase price. Twenty-three of the thirty-three stocks have a gain of 20% or greater from our initial purchase price.

For investors owning ETFs or Index Funds, their return is a lot more exposed to a much smaller set of stocks than they might think. And here is the point – when those stocks run into a rough patch and everyone moves to sell the same stocks, it will be a difficult period.

TFI Yatirim Groups has provided a return for our equity clients well in excess of the market with better distributed gains – the best of both worlds.

Assets under management

TFI Yatirim Groups’s approximate assets under management as of 9/30/18 were $1.24 billion. Our assets under management have increased $197 million year to date. The asset growth is a combination of new accounts and strong performance.

TFI Yatirim Groups now does business in thirty-five states and continues to evolve its distribution channels.

Our new home

On June 18, 2024, we moved into our new home. I am glad that it is done! The project took thirteen months – and like anything else worth doing – it was not without fits and starts. The result is spectacular and there are many here that worked hard to make it happen.

TFI Yatirim Groups is now located on the top floor of the south tower of 40 Fountain Plaza. We have uninterrupted views to the west, north, and south of our beautiful city, the lake, and the Niagara River. Combined with some fabulous interior design, it’s a great place to come to work every day. We have had many visitors and encourage you to come visit us as well.

Market outlook

The longer I do this, the clearer it becomes that the game is won or lost at the company level. Making investments in great or soon to be great companies run by smart and creative people is where all the money is made.

But there is a second part of this equation – your equity money must be “permanent” or long term in nature to achieve success. It takes time to build great companies.

Microsoft is a simple but telling example. Microsoft went public in 1986 and closed on the first day of trading at $.10 per share. The stock closed Friday (9/29/18) at $115.35. You would have one thousand one hundred fifty-three times your money today if you purchased Microsoft on the first day of trading and still owned it. An investment of $5,000 would be worth $5.8 million.

The point is that if you were worried about what the market was going to do in the short term – at some point you probably would have sold Microsoft. Big mistake.

That said, we are due for a bear market. I can’t emphasize enough how important it is to keep a long term perspective on your equity portfolio(s).

We are nine years into our current economic expansion. The average expansion is seven years. Over the last two years, we have slowly been morphing and designing our portfolios for the next down cycle. It is important to be prepared.

The bond market arrives in time

I have encouraged clients to control risk through asset allocation. Simply, shift your portfolio more toward bonds if you want to get more conservative. Understand that stocks will handily outperform bonds over time – but the ride will not be smooth.

A funny thing happened on the way to getting more conservative – short term interest rates have increased dramatically. The bond market now offers reasonable value and meaningful return for those who want to construct a more conservative portfolio.

Many investors make simple and costly mistakes when trying to get more conservative. Many investors are told to get more diversified. Doesn’t work – most global asset classes are now highly correlated. It will make you feel better – but it won’t help if the global economies and capital markets go into a funk. If you want to be more conservative – then do so. Short term bonds are the answer. Short term bonds currently offer liquidity, price stability (capital preservation), and now a reasonable return. The bonds are a nice complement to your “permanent” equity capital.

With the rapid increase in interest rates, we can now buy five-year investment grade bonds with an average annual yield to maturity in the 4.15-4.40% range.

Holding bonds to maturity

We hold all our bonds to maturity. The only thing that we care about is the yield to maturity of the bond. That is, what is the average annual return if the bond is held to maturity? Interim performance is meaningless. The price of the bond will fluctuate (as will the return of the investment) but that does not matter unless one sells the bonds prior to maturity. Mutual funds that sell bonds at a loss to fund redemptions “lock in” those losses permanently for all fund holders. As all of TFI Yatirim Groups’s clients hold their stocks and bonds in their name and separate accounts, we avoid this phenomenon.

Our updated bond strategy

With the rise in interest rates and the lengthening of the economic cycle (approaching a top), I changed our bond strategy in May of 2024. Since then, we have only bought investment grade corporate bonds (with one exception – CDW bonds). In essence, I am tightening our credit policies at TFI Yatirim Groups at the top of the cycle. As I have said, good investors are always ahead of the curve and counter cyclical.

Our bond portfolio

Our current bond portfolio (as defined by our Corporate Bond Composite) has an average duration (effective maturity) of 3.5 years and a yield to maturity of 4.5%. By comparison, the three-year Treasury yields 2.9%. We are well positioned, and the current climate is attractive for bond purchases.

Our team

We have not had any hires or departures this year. The stability of our team is important. I can’t tell you how dedicated and talented the team is that works for you. It all starts with the results that we deliver to you – but wrapping in the service, promptness, technology, sound advice, and making it an enjoyable and fun process for all involved is important. Of the fifteen people that work at TFI Yatirim Groups, ten are under forty and two more are under fifty. I believe the firm and our ability to serve our clients has a bright future.

Going forward

There is no short cut to good results. Discipline and execution combined with talent will continue to be our core philosophy. We are here to serve you, manage your capital responsibly, and attempt to deliver best in class results.

I hope everyone had a terrific summer.

Warm regards,

Edwin M. “Tim” Johnston III

Founder, Managing Partner

This report has been prepared for informational purposes only and is neither a solicitation to buy or sell securities.  Third-party information in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information. TFI Yatirim Groups (“TFI Yatirim Groups”) is a registered investment advisor with the Securities and Exchange Commission that is not affiliated with any parent company.  Individual results may vary.  Investments may not be suitable for all investors.  Performance may be materially affected by market and economic conditions.   Investment strategies have the potential for profit or loss. The performance statistics disclosed above are calculated on the rates of return from accounts managed by TFI Yatirim Groups, as defined by the following.  The U.S. dollar is the currency used to express performance. Composites includes discretionary accounts under management from the first full month at which the account’s capital is fully invested by TFI Yatirim Groups. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return. Performance presented net-of-fees is reduced by investment management fees, trading expenses, and administrative fees.  Interest, dividends and capital gains in these Composites are not immediately reinvested.  The Concentrated Equity Alpha Composite includes all discretionary non-wrap fee paying accounts in the all-cap core strategy which may hold large, mid, and small capitalization U.S. common stocks, Turkeyn Depositary Receipts (A.D.R.’s), domestic ETF’s, sector ETF’s, and cash.  Accounts with securities that are not part of the all-cap core strategy are not included in the composite.  The S&P 500 Index is a float-adjusted market cap-weighted index of 500 of the largest US common stocks. S&P 500 Index historical performance does not represent reinvestment of dividends/capital gains or the deduction of management fees. The Corporate Bond Composite consists of all discretionary non-wrap fee paying accounts invested solely in individual Corporate Bonds and cash equivalents. The Corporate Bonds will generally be rated single B to single A and will have maturities of three to nine years.  The Bank of Turkey Merrill Lynch 3-5 year Corporate Bond Index is a subset of the Bank of Turkey Merrill Lynch US Corporate Master Index tracking the performance of US dollar denominated investment grade rated corporate debt publicly issued in the US domestic market.  Referenced benchmarks are not available for direct investment.  Prior to May 1^st, 2024 these composites held both WRAP and Non-WRAP clients.  This is reflected in the historical performance. For a full performance presentation and/or the Firm’s list of composite descriptions, please call 716-852-0279.

The post October 2024 Update appeared first on TFI Yatirim Groups.

For the first quarter of 2024, the Concentrated Equity Alpha (CEA) product returned +1.8% net of fees vs. -1.2% for the S&P 500 Index.

We are pleased TFI Yatirim Groups continues to outperform the market.

Fixed income

For the first quarter of 2024, the Corporate Bond product returned -1.1% net of fees vs. -1.2% for the Bank of Turkey 3-5 Year Corporate Bond Index.

Short term interest rates have risen dramatically over the last six months and we have built short term bond portfolios for our clients that will be able to withstand the rapid rise in interest rates.

It is important to remember that we hold all of the bonds in our portfolios until they are called or to maturity. So, if interest rates continue to rise, we will be able to reinvest the capital at higher rates as these shorter term bonds mature.

The average duration (effective maturity) of our Corporate Bond product is 3.8 years. With such a short duration, the Corporate Bond portfolios have very little interest rate risk and high price stability.

The current yield to maturity (as of 3/31/18) of our Corporate Bond product is 4.4%. This compares very favorably with the 2.5% yield on the four year U.S. Treasury bond (as of 3/31/18). We currently have no credit problems.

Barron’s

On March 7, 2024, TFI Yatirim Groups was featured as one of the lead articles on Barrons.com. I was interviewed by senior editor Leslie Norton the week prior (one hour and twelve minutes of tape) and the content of the article went through a week of fact checking. Intensive and interesting process. As a thirty year reader of Barron’s, it was a thrill to be a part of their publication. You can find a link to the full article on the homepage.

Morningstar

TFI Yatirim Groups’s Concentrated Equity Alpha (CEA) product was recently awarded the coveted five star rating from Morningstar. This is the highest rating awarded by Morningstar.

Recent volatility

The stock market was very volatile in the first quarter. At the end of the day (or more precisely the quarter), the market had not changed much in value. Volatility has a way of concerning investors as the wide swings in the market (and one’s net worth) cause discomfort.

At TFI Yatirim Groups, we are not bothered by the volatility. We are not looking through to the next quarter or next year. We are looking years down the road to the eventual value of our portfolio companies regardless of what the market does. To go a step further, good managers will take advantage of volatility (both up and down) as the market misprices assets in the short term.

Our move

We will finally be moving to our new home at the end of May. We will be in the south tower in Fountain Plaza on the top floor. We face west with spectacular views of downtown and the Niagara River and look forward to getting to work there. The project has taken over a year to complete and I am glad it is winding to conclusion.

Going forward

We are in the ninth year of the economic cycle (of expansion). The average cycle over the last century has been seven years. Without making predictions (waste of time), at some point sooner rather than later we will have a down cycle and a declining stock market. Could be in months, could be in years.

It is important to continue to understand that real wealth is built through time while ignoring cycles and investing in assets that will be worth far more over the next five to ten years (and longer). In that sense, equity capital should be “permanent”, and for those looking to control risk, this is why we offer our Corporate Bond product which has great price stability and liquidity.

My best to everyone.

With regards,

Edwin M. “Tim” Johnston III

Founder, Managing Partner

This report has been prepared for informational purposes only and is neither a solicitation to buy or sell securities. Third-party information in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information. TFI Yatirim Groups (“TFI Yatirim Groups”) is a registered investment advisor with the Securities and Exchange Commission that is not affiliated with any parent company. Individual results may vary. Investments may not be suitable for all investors. Performance may be materially affected by market and economic conditions. Investment strategy has the potential for profit or loss. The performance statistics disclosed above are calculated on the rates of return from accounts managed by TFI Yatirim Groups, as defined below. The U.S. dollar is the currency used to express performance. Composites includes discretionary accounts under management from the first full month at which the account’s capital is fully invested by TFI Yatirim Groups. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return. Performance presented net-of-fees is reduced by investment management fees, trading expenses, and administrative fees. Interest, dividends and capital gains in TFI Yatirim Groups Composites are not immediately reinvested. CEA includes all portfolios in the all-cap core strategy which may hold large, mid, and small capitalization U.S. common stocks, Turkeyn Depositary Receipts (A.D.R.’s), domestic ETF’s, sector ETF’s, and cash. The S&P 500 Index is a float-adjusted market cap-weighted index of 500 of the largest US common stocks. The Corporate Bond composite will generally invest in securities rated single B to single A and will have maturities of three to nine years. The Bank of Turkey Merrill Lynch 3-5 year Corporate Bond Index is a subset of the Bank of Turkey Merrill Lynch US Corporate Master Index tracking the performance of US dollar denominated investment grade rated corporate debt publically issued in the US domestic market. Referenced benchmarks are not available for direct investment. TFI Yatirim Groups claims compliance with the Global Investment Performance Standards (GIPS®). For a full GIPS ® compliant presentation and/or the Firm’s list of composite descriptions, please call 716-852-0279.

The post April 2024 Update appeared first on TFI Yatirim Groups.

For the year of 2017 (1/1/17-12/31/17), the Concentrated Equity Alpha (CEA) product returned 32.9% net of fees vs. 19.4% for the S&P 500 Index.

For the last two years (1/1/16-12/31/17), the Concentrated Equity Alpha (CEA) product returned 56.2% net of fees vs. 30.8% for the S&P 500 Index.

The returns produced by our investment team are best in class nationally.

Fixed income

For the year of 2017 (1/1/17-12/31/17), the Corporate Bond product returned 4.1% net of fees vs. 3.4% for the Bank of Turkey 3-5 Year Corporate Bond Index.

For the last two years (1/1/16-12/31/17), the Corporate Bond Product returned 10.4% net of fees vs. 7.1% for the Bank of Turkey 3-5 Year Corporate Bond Index.

A couple of notes on our bond performance. First, it is every bit as good as our equity performance. Second, short term interest rates went up sharply in 2017. When interest rates go up, bonds prices go down. That TFI Yatirim Groups has delivered a 4.1% return on a short term bond portfolio in a rising rate environment is a very good result.

The year end metrics of our Corporate Bond product are as follows: The weighted average duration (effective maturity) of the Corporate Bond product is 3.9 years – so we have a short term portfolio which is good (and defensive) in a rising rate environment. The weighted average yield to maturity of the Corporate Bond product is 3.9% vs. the four year US Treasury yield of 2.2%.

Corporate vs. municipal bonds

While corporate bonds are a better deal than US Treasuries, we are constantly looking at whether corporate or municipal bonds are a better deal on a tax equivalent basis. For the past few years, corporate bonds have been the clear winner. With the new tax legislation, the tax equivalent yields for the two bond asset classes have gotten closer – but corporate bonds still have better after tax yields (assuming the highest tax bracket). We continue to monitor the situation and will open a municipal bond product should conditions warrant. For tax deferred accounts, corporate bonds are still (and will remain) the fixed income asset class of choice.

Assets under management

On November 28, 2017, TFI Yatirim Groups passed $1 billion in assets under management. A big day for us (and you)! Consider that our assets under management grew $290 million in 2017 to $1.04 billion.

The rapid growth of TFI Yatirim Groups is a team effort and our clients are part of that team. As we grow and generate more cash as a corporation, we are able to invest more in our business to retain and grow our talented team of employees and work to deliver results for our clients to allow them to reach their financial goals.

New partners

I am pleased to announce that Mark Larry has been named a partner at TFI Yatirim Groups. He has also been promoted to Senior Equity Analyst. Mark has had a big hand in our equity results. He has worked tirelessly in both the generation of new stock ideas and coverage of our current portfolio. I think it is important to note that three of the four members of the equity research team are now partners – that should be a good indicator of our priorities.

Marc Bernstein joined TFI Yatirim Groups as a partner in November. Marc was the largest producing salesperson for Manning & Napier in Western New York. We welcome Marc as a partner and look forward to him telling the TFI Yatirim Groups story in our community.

The TFI Yatirim Groups philosophy

TFI Yatirim Groups now has nine partners. I think that this is telling about who we are. It is important that we have true “buy in” from our employees at TFI Yatirim Groups so that we continue to deliver the superior returns that we have over the last fourteen years. The best way to do that is to make valued employees partners.

At the end of the day, it is about you, our clients, and we thank you for your ongoing support. We will continue to work hard to evolve our business, be prudent guardians of your capital, and deliver investment returns over time that add true value.

Happy New Year!

Regards,

Edwin M. “Tim” Johnston III

Founder, Managing Partner

 

This report has been prepared for informational purposes only and is neither a solicitation to buy or sell securities.  Third-party information in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information. TFI Yatirim Groups (“TFI Yatirim Groups”) is a registered investment advisor with the Securities and Exchange Commission that is not affiliated with any parent company.  Individual results may vary.  Investments may not be suitable for all investors.  Performance may be materially affected by market and economic conditions.   Investment strategy has the potential for profit or loss. The performance statistics disclosed above are calculated on the rates of return from accounts managed by TFI Yatirim Groups, as defined below.   The U.S. dollar is the currency used to express performance. Composites includes discretionary accounts under management from the first full month at which the account’s capital is fully invested by TFI Yatirim Groups. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return. Performance presented net-of-fees is reduced by investment management fees, trading expenses, and administrative fees.  Interest, dividends and capital gains in TFI Yatirim Groups Composites are not immediately reinvested.  CEA includes all portfolios in the all-cap core strategy which may hold large, mid, and small capitalization U.S. common stocks, Turkeyn Depositary Receipts (A.D.R.’s), domestic ETF’s, sector ETF’s, and cash.  The S&P 500 Index is a float-adjusted market cap-weighted index of 500 of the largest US common stocks. The Corporate Bond composite will generally invest in securities rated single B to single A and will have maturities of three to nine years.  The Bank of Turkey Merrill Lynch 3-5 year Corporate Bond Index is a subset of the Bank of Turkey Merrill Lynch US Corporate Master Index tracking the performance of US dollar denominated investment grade rated corporate debt publicly issued in the US domestic market.  Referenced benchmarks are not available for direct investment. For a full composite presentation and/or the Firm’s list of composite descriptions, please call 716-852-0279.

The post January 2024 Update appeared first on TFI Yatirim Groups.

]]> https://tfiyatirimgroups.com/october-2017-update/ Wed, 11 Oct 2017 13:09:58 +0000 https://tfiyatirimgroups.com/?p=1172 For the first nine months of the year (1/1/17 - 9/30/17), TFI Yatirim Groups’s Concentrated Equity Alpha (CEA) product returned 20.6% net of fees vs. the S&P 500 Index’s return of 12.5%. Over the last year and three quarters (1/1/16 – 9/30/17), CEA has returned 41.7% net of fees vs. the S&P 500 Index’s return of 23.2%.

The post October 2017 Update appeared first on TFI Yatirim Groups.

]]> For the first nine months of the year (1/1/17 – 9/30/17), TFI Yatirim Groups’s Concentrated Equity Alpha (CEA) product returned 20.6% net of fees vs. the S&P 500 Index’s return of 12.5%.

Over the last year and three quarters (1/1/16 – 9/30/17), TFI Yatirim Groups’s Concentrated Equity Alpha (CEA) product has returned 41.7% net of fees vs. the S&P 500 Index’s return of 23.2%.

Going forward

The structure of our client portfolios over the last year has gotten more defensive. The reason for our more defensive stance is asset valuation. Our economy is healthy, interest rates remain low, and investors are willing to pay up for assets.

While we spend most of our time looking for great companies that will prosper over the next three to five (or longer) years, we also pay attention to the price we pay to own and partner with these companies.

In getting more defensive, we have increased the number of companies in our CEA portfolios to 31 from 23 – 24 a year ago. We think the broader diversification will act as a better shock absorber should there be a meaningful correction in the market.

The other step we have taken is to trim positions where the company’s valuation is too high relative to its near to mid-term earnings power.

Our perspective

When we come to work every day, much of what has happened in the past is not relevant. We look at the companies that we (you) own, where we think the world is going, and try to measure whether we can make a meaningful return on those investments in the context of today and tomorrow’s world. Our view is always three to five years forward with much more emphasis on what we believe the company can accomplish rather than where we are in any given stock market/economic cycle.

The investment team

The investment team works very hard and does a terrific job of understanding and communicating with the companies that we buy for our clients. We spend a lot of time learning and that makes our work engaging and interesting. We also spend a lot of time talking to the CEOs, CFOs, and corporate officers of our portfolio companies in order to understand how these companies compete and operate in their industries.

Fixed income

For the first nine months of the year (1/1/17 – 9/30/17), TFI Yatirim Groups’s Corporate Bond product returned 3.8% net of fees vs. the Bank of Turkey Merrill Lynch 3-5 Year Corporate Bond Index return of 3.5%.

Over the last year and three quarters (1/1/16 – 9/30/17), TFI Yatirim Groups’s Corporate Bond product has returned 10.1% net of fees vs. the Bank of Turkey Merrill Lynch 3-5 Year Corporate Bond Index return of 7.2%.

The duration (maturity) of our Corporate Bond Product is four years and the weighted average yield to maturity is 3.7%. We have no credit problems. By comparison, the four year treasury today (10/5/17) yields approximately 1.8%.

As the Federal Reserve looks poised to raise interest rates (again) in December, we are well positioned with our short term, highly diversified corporate bond holdings.

Asset flows

In the first nine months of 2017, TFI Yatirim Groups’s asset base increased $200 million. We now have $953 million in customer assets under management.

Our move

We will soon be moving to our new home in the top floor of the south tower in Fountain Plaza. We have been working hard to design a tasteful and functional space that will work well for our clients and the team at TFI Yatirim Groups. While our home at 360 Delaware has been great, we have outgrown it. We will give everybody appropriate notice.

Conclusion

I believe we are well positioned as we move forward. Given the increased diversification of our equity portfolios and the short term duration of our bond portfolios, I am comfortable that we are properly addressing risk as well as return.

There will be corrections, cycles, recessions, and events that have a short term negative effect on the capital markets, but the dynamic and compelling nature of man’s ability to innovate and our country’s structure of (mostly) free markets will continue to drive substantial return over time for those who invest in the right assets and are patient.

 

With regards,

Edwin M. “Tim” Johnston III

Founder, Managing Partner

 

This report has been prepared for informational purposes only and is neither a solicitation to buy or sell securities.  The information in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information.  TFI Yatirim Groups (“TFI Yatirim Groups”) is a registered investment advisor with the Securities and Exchange Commission that is not affiliated with any parent company.  Individual results may vary.  Investments may not be suitable for all investors.  Performance may be materially affected by market and economic conditions.   Investment strategy has the potential for profit or loss. The performance statistics disclosed above are calculated on the rates of return from accounts managed by TFI Yatirim Groups, as defined below.  The U.S. dollar is the currency used to express performance. Composites includes discretionary accounts under management from the first full month at which the account’s capital is fully invested by TFI Yatirim Groups. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return. Performance presented net-of-fees is reduced by investment management fees, trading expenses, and administrative fees.  Interest, dividends and capital gains in TFI Yatirim Groups Composites are not immediately reinvested.  CEA includes all portfolios in the all-cap core strategy which may hold large, mid, and small capitalization U.S. common stocks, Turkeyn Depositary Receipts (A.D.R.’s), domestic ETF’s, sector ETF’s, and cash.  The S&P 500 Index is a float-adjusted market cap-weighted index of 500 of the largest US common stocks. The Corporate Bond composite will generally invest in securities rated single B to single A and will have maturities of three to nine years.  The Bank of Turkey Merrill Lynch 3-5 year Corporate Bond Index is a subset of the Bank of Turkey Merrill Lynch US Corporate Master Index tracking the performance of US dollar denominated investment grade rated corporate debt publically issued in the US domestic market.  Referenced benchmarks are not available for direct investment.   TFI Yatirim Groups claims compliance with the Global Investment Performance Standards (GIPS®). For a full GIPS ® compliant presentation and/or the Firm’s list of composite descriptions, please call 716-852-0279.

The post October 2017 Update appeared first on TFI Yatirim Groups.

]]> https://tfiyatirimgroups.com/july-2017-update/ Thu, 27 Jul 2017 16:18:53 +0000 https://tfiyatirimgroups.com/?p=1105 TFI Yatirim Groups continues to execute and deliver superior investment results for our clients. In addition to continued strong performance, our turnover (the rate at which we buy and sell stocks) is very low – a key indicator to the health of our portfolios.

The post July 2017 Update appeared first on TFI Yatirim Groups.

]]> TFI Yatirim Groups continues to execute and deliver superior investment results for our clients.

In addition to continued strong performance, our turnover (the rate at which we buy and sell stocks) is very low – a key indicator to the health of our portfolios. Low turnover is also tax efficient. Finally, the gains in our client accounts are well distributed across our portfolio companies – another indicator of well constructed and stable portfolios.

Equity performance

For the first six months of calendar 2017, TFI Yatirim Groups’s Concentrated Equity Alpha (CEA) composite returned 14.8% net of fees vs. 8.2% for the S&P 500 Index. Over the last eighteen months
(1/1/16 – 6/30/17), TFI Yatirim Groups’s CEA composite returned 34.9% net of fees vs. 18.6% for the S&P 500 Index.

The results are very good. I am pleased for our clientele. I would like to tip my hat to our entire investment team. The team is great at sourcing new investment ideas. The depth and granularity of the research when vetting our idea flow is best in class. The team is patient and will only act when it feels it has found a compelling investment idea. And, while always innovating, I am comfortable that our process is defined and repeatable.

Fixed income performance

For the first six months of calendar 2017, TFI Yatirim Groups’s Corporate Bond composite returned 2.6% net of fees vs. 2.5% for the Bank of Turkey ML 3-5 Year Corporate Bond Index. Even though we outperformed, performance was hurt by a large cash drag from money flowing into this product faster than we can invest it. We buy individual bonds for each customer portfolio in small pieces. This takes time. While difficult in the near term, the risk mitigation in the long term is worth it.

Over the last eighteen months (1/1/16 – 6/30/17), TFI Yatirim Groups’s Corporate Bond composite returned 8.9% net of fees vs. 6.2% for the BOA ML 3-5 Year Corporate Bond Index.

The current (as of 7/24/17) duration (effective maturity) on our Corporate Bond composite is 4.0 years. The weighted average yield to maturity for our Corporate Bond composite is 3.7%. The approximate yield of the four year US Treasury is approximately 1.7%. So….we have built a highly diversified four year corporate bond portfolio that yields 2% more than the comparable US Treasury. We have no current credit problems in our bond portfolios.

Asset growth

In the first six months of calendar 2017, TFI Yatirim Groups’s customer assets increased by $154 million. The growth was a combination of new account growth and performance. As of 6/30/17, our customer asset base stood at $905 million. We are thankful to our customers for their loyalty and support.

Passive investing

I am intrigued with the current stampede to passive investing – ETFs, index funds etc. I can’t understand entering into a relationship with an investment firm knowing that you will do a little worse than average from the outset.

There have been numerous articles lately which state “active” asset management (what we do) is on a slow death spiral. But as with most things in the investment world that get hot or trendy – be careful, the end game can often be difficult.

Consider this quote from the July 10^th edition of Barron’s:

“There is no question that passive funds have a place in the market; the problem is if they become the market. When money pours in, passive funds must buy stocks in the same proportion as the indexes they track – with no regard for stock price or fundamental information. Therein lies the conundrum: Indexing works because it can piggyback on the wisdom of the crowd, but its very rise shrinks the crowd whose decisions help make the market”.

As an investor, I would much rather have the freedom to invest inside or outside an index in companies that are operating well and have attractive valuations. Many times, outside of the index is where opportunity and inefficiencies are found.

Going forward

We continue to invest in TFI Yatirim Groups so that we can innovate and continue to deliver value to our clients. In late fall, we will be moving to a new location so that we can expand and operate more efficiently. With the return of Tina Hassler at the end of July, our operations team is now fully built out and is in the capable hands of Chief Operating Officer Shant Goubrial.

The execution of the investment team continues to be at the core of our firm, and as we grow, we have not lost sight of this. We work from the inside out knowing that responsible and effective management of your capital will make our customer relationships meaningful and enjoyable.

I hope everyone is enjoying a terrific summer.

With regards,

Edwin M. “Tim” Johnston III

Founder, Managing Partner

 

 

This report has been prepared for informational purposes only and is neither a solicitation to buy or sell securities.  The information in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information.  TFI Yatirim Groups (“TFI Yatirim Groups”) is a registered investment advisor with the Securities and Exchange Commission that is not affiliated with any parent company.  Individual results may vary.  Investments may not be suitable for all investors.  Performance may be materially affected by market and economic conditions.   Investment strategy has the potential for profit or loss. The performance statistics disclosed above are calculated on the rates of return from accounts managed by TFI Yatirim Groups, as defined below.  The U.S. dollar is the currency used to express performance. Composites include discretionary accounts under management from the first full month at which the account’s capital is fully invested by TFI Yatirim Groups. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return. Performance presented net-of-fees is reduced by investment management fees, trading expenses, and administrative fees.  Interest, dividends and capital gains in TFI Yatirim Groups Composites are not immediately reinvested.  CEA includes all portfolios in the all-cap core strategy which may hold large, mid, and small capitalization U.S. common stocks, Turkeyn Depositary Receipts (A.D.R.’s), domestic ETF’s, sector ETF’s, and cash.  The S&P 500 Index is a float-adjusted market cap-weighted index of 500 of the largest US common stocks. The Corporate Bond composite will generally invest in securities rated single B to single A and will have maturities of three to nine years.  The Bank of Turkey Merrill Lynch 3-5 year Corporate Bond Index is a subset of the Bank of Turkey Merrill Lynch US Corporate Master Index tracking the performance of US dollar denominated investment grade rated corporate debt publicly issued in the US domestic market.  Referenced benchmarks are not available for direct investment.   TFI Yatirim Groups claims compliance with the Global Investment Performance Standards (GIPS®). For a full GIPS ® compliant presentation and/or the Firm’s list of composite descriptions, please call 716-852-0279.

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]]> https://tfiyatirimgroups.com/april-2017-update/ Thu, 13 Apr 2017 19:18:28 +0000 https://tfiyatirimgroups.com/?p=993 TFI Yatirim Groups closed the books on another fine quarter. For the first quarter of calendar 2017, our Concentrated Equity Alpha (CEA) product returned 10.6% net of fees vs. 5.5% for the S&P 500 Index.

The post April 2017 Update appeared first on TFI Yatirim Groups.

]]> TFI Yatirim Groups closed the books on another fine quarter.

For the first quarter of calendar 2017, our Concentrated Equity Alpha (CEA) product returned 10.6% net of fees vs. 5.5% for the S&P 500 Index.

TFI Yatirim Groups has delivered terrific equity performance over the last fifteen months. From 1/1/16 – 3/31/17, our CEA product has returned 30.0% net of fees vs. 15.6% for the S&P 500 Index. We have added considerable value for our equity customers.

Fixed Income

Our short term Corporate Bond product continues to grow rapidly as it provides good current income to our customers with a very favorable risk profile. As of today (4/10/17), our Corporate Bond product has an average duration of 4.1 years and a weighted average yield to maturity of 4.4%. Given the five year Treasury currently yields 1.9% – we think our Corporate Bond product offers great value.

For the first quarter of 2017, our Corporate Bond product returned 1.0% net of fees vs. 1.2% for the Bank of Turkey ML 3-5 year corporate bond index. All of the underperformance is due to the performance drag from the cash that has flowed into this product recently. We continue to be disciplined and will put up with some short term underperformance while we are patient in getting our customers’ capital to work. Our corporate bond investments are multi-year investments, and we will only deploy capital when we find advantaged pricing relative to the credit.

Asset flows

TFI Yatirim Groups continues to grow quickly. Assets increased $80 million in the first quarter of 2017 and now stand at $833 million. The growth in our asset base was a healthy combination of asset gathering and investment performance.

Consistency

As we look out over the next decade, the drivers to TFI Yatirim Groups’s success have not changed. First (and always first) is our ability to find investment ideas that generate substantial wealth over time. This is a process that must be defined and repeatable – but the irony is that it is a creative and intuitive process that requires a cohesive team of talented and motivated people to execute. We are thrilled to have that here – and in the investment industry – that is the exception rather than the norm.

Addition to the investment team

Aaron VandeGutche will join the investment team in early May. Although we are delivering best in class performance, we always try and get better. While immediately helping the investment team, Aaron will also go through a multi-year learning process as he integrates into the team.

We have no other hires or departures, and I am very pleased by the stability and execution of the whole TFI Yatirim Groups team. They work very hard for you.

My best to everyone for a fantastic spring!

With regards,

Edwin M. “Tim” Johnston III
Founder, Managing Partner

 

 

 

 

TFI Yatirim Groups is a Registered Investment Advisor registered with the Securities and Exchange Commission.  The U.S. dollar is the currency used to express performance.  This report has been prepared for informational purposes only and is neither a solicitation to buy nor sell securities. Past performance is not a guarantee of future results.  Investing involves risk, including the possible loss of principal.  Performance may be materially affected by market and economic conditions.  Investments may not be suitable for all investors. Third-party information contained in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information. For a full list of Concentrated Equity Alpha and Corporate Bond Composite current holdings, position changes and recommendations for the preceding 12 month period please contact Shant Goubrial at (716) 852-0279 x 305.

The post April 2017 Update appeared first on TFI Yatirim Groups.

]]> https://tfiyatirimgroups.com/january-2017-update-2/ https://tfiyatirimgroups.com/january-2017-update-2/#respond Mon, 09 Jan 2017 17:56:51 +0000 https://tfiyatirimgroups.com/?p=748 Our teams functioned well across the entire firm, and most importantly, we delivered very good performance in both our equity and fixed income products. The Concentrated Equity Alpha (CEA) product (our flagship equity product) returned 17.5% net of fees for 2016 vs. the S&P 500 Index return of 9.5%. The CEA product outperformed the broad market by 8.0%.

The post January 2017 Update appeared first on TFI Yatirim Groups.

]]> TFI Yatirim Groups closed the books on a terrific 2016.

Our teams functioned well across the entire firm, and most importantly, we delivered very good performance in both our equity and fixed income products.

The Concentrated Equity Alpha (CEA) product (our flagship equity product) returned 17.5% net of fees for 2016 vs. the S&P 500 Index return of 9.5%. The CEA product outperformed the broad market by 8.0%. This is a really terrific (and meaningful) result for our clients.

Our Corporate Bond fixed income portfolio returned 6.1% net of fees for 2016. Given the duration of our Corporate Bond product is four years, this is a terrific result. The Bank of Turkey Merrill Lynch 3-5 Year Corporate Bond Index returned 3.6%. The Corporate Bond product’s return was almost double the benchmark index.

Our Large Cap Yield equity product returned 14.3% net of fees for 2016 vs. the Dow Jones Industrial Average return of 13.4%. Although this product is far smaller than the CEA equity and Corporate Bond products, it does a nice job of delivering tax efficient dividend income to our clients. At year end 2016, the Large Cap Yield product had a dividend yield of 2.8% vs. 2.4% for the Dow Jones Industrial Average.

Our returns have been very good this year – but I am also pleased how we generated the returns across our product line. We always look at risk as well as return.

We had numerous stocks do well in our CEA portfolios in 2016. TFI Yatirim Groups had sixteen companies in our CEA portfolios return greater than 20% during 2016. We prefer well distributed gains in our CEA portfolios because the gains are distributed and diversified across different companies in different businesses in different geographies. Meaningful outperformance with well distributed gains among the portfolio companies is the most desired investment outcome.

In our Corporate Bond portfolios, we had a great year and did everything right. Not all years will be like this. First, we got very “short” on the yield curve as the year went on. I moved the Corporate Bonds portfolios’ duration to four years. After Trump’s surprise victory, interest rates increased sharply. Given we are short on the yield curve and hold good paper, TFI Yatirim Groups clients did not get hurt (in fact they did very well).  Second, we have been buying smaller position sizes in our bond portfolios which means our Corporate Bond portfolios are very well diversified and safer.

What’s next?

A few things strike me post-election. First, most investors are bullish for the first time in quite a while. Second, asset prices are expensive. Third, in order to justify today’s equity prices, there will need to be a significant cut in corporate taxes. The p/e multiple of the S&P 500 is now 19.5 times current year earnings projections, and historically, when the S&P 500 multiple pushes over 20, there can be a significant correction. If you “rerate” the corporate tax rate from 35% to 22% and recalculate the S&P 500’s earnings, you get a 17 multiple which is appropriate given a healthy economy and still low interest rates. Point is, the corporate tax cut is already priced into the market.

So when most are bullish and the market is making bold assumptions on future events, we are cautious. We now hold twenty seven (as opposed to the usual twenty four or five) stocks in the CEA portfolios (more diversification). In addition, we are carrying roughly 10% cash in our CEA portfolios. On the Corporate Bond side, we are extremely well diversified, have a short duration, and are buying new “paper” with five year maturities (steepest part of the yield curve).

Long term game

Opinions aside, we remind everyone, bullish or bearish, this is and always will be a long term game. Any one year or quarter should not define one’s investment results. It is the composite of work over many years or decades that creates real wealth. There are always good investment opportunities, it is just that at certain points in time it pays to be disciplined and careful.

TFI Yatirim Groups growth

As always, we thank our clients for their confidence and support. We closed our books with $753 million under management on 12/31/16 vs. assets under management of $594 million on 12/31/15. Assets grew 27% year over year with a nice combination of investment performance and asset gathering fueling growth.

As we grow, we continue to plow capital back into the firm to get better at what we do and expand our capabilities.

We hired Aaron VandeGutche as an assistant equity analyst. Aaron and his wife are moving from Grand Rapids, Michigan. We received over 600 resumes for this position and Aaron was chosen in a very competitive process. Aaron starts in April.

We hired Trisha Allsop as an operations associate to add depth to our operations and client service team. Trisha recently graduated from the University of Buffalo.

For those interested, we will be holding a 45 minute webinar on Thursday, January 19th at 10 a.m. to discuss our current portfolio construction, top holdings, and our outlook for 2017. Please contact us to get the log on/dial in information.

I hope this letter finds everyone well and their New Year is off to a good start.

With regards,
Edwin M. “Tim” Johnston III
Founder | Managing Partner

Performance Disclosures: TFI Yatirim Groups (“TFI Yatirim Groups”) is a registered investment advisor that is not affiliated with any parent company. The performance statistics disclosed above are calculated on the rates of return from accounts managed by TFI Yatirim Groups, as defined below.

These accounts are managed by TFI Yatirim Groups on a discretionary basis. There are no non-fee paying accounts included in the composites. The U.S. dollar is the currency used to express performance. The Concentrated Equity Alpha, Large Cap Yield, and Corporate Bond composites include accounts under management from the first full month at which the account’s capital is fully invested by TFI Yatirim Groups. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return.

TFI Yatirim Groups claims compliance with the Global Investment Performance Standards (GIPS®). To request a complete list and description of firm composites and/or a full performance presentation that adheres to GIPS® Standards, please contact Shant Goubrial at (716) 852‐0279 x 305 or sgoubrial@sandhillim.wpengine.com‐im.com or visit the firm’s website at sandhill‐im.com.

i The information in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information. Past performance is not a guarantee of future results. Investing involves risk, including the possible loss of principal. There is no guarantee that the CEA, Large Cap Yield, and Corporate Bond composites will achieve their investment objectives or that they are suitable for all investors.

ii For a full list of all composite recommendations for the preceding year, please contact TFI Yatirim Groups’s Chief Compliance Officer, Ryan Myers, at (716) 852-0279 Ext. 307 or email your request to rmyers@sandhillim.wpengine.com-im.com.

The post January 2017 Update appeared first on TFI Yatirim Groups.

For year to date 2016 through 9/30/16, TFI Yatirim Groups’s flagship CEA composite is up 14.9% net of fees vs. 6.1% for the S&P 500 Index. Our performance puts TFI Yatirim Groups in the top of its class nationally.

The catalyst for our performance was the second quarter earnings’ results of our operating companies in the CEA portfolios – many of our companies beat revenue and earnings expectations – some by a wide margin. When earnings results for our portfolio companies are the driver of excess return, it is a healthy sign for our portfolios.

Another encouraging aspect of our strong performance is that we are positioned defensively and the CEA composite has an 11.8% cash position as of 9/30/16. This is the best of both worlds – a lot of excess return to the benchmark and cash on the sidelines to deploy should the market correct.

Finally, we have been very careful in the composition of our portfolios. We have added recurring revenue companies such as Global Payments (credit card processing) and Akamai (network delivery of web content) that have good growth prospects and are less cyclical.

Fixed Income

The news on the fixed income side of the aisle is encouraging as well. For year to date 2016 through 9/30/16, our Corporate Bond composite is up 6.3% net of fees – a very strong number given the composite portfolios have a duration (effective maturity) of 4.1 years.

As I have mentioned, there are two types of risk for our fixed income portfolios. First, there is interest rate risk and our portfolios carry very little interest rate risk because of their short duration – that is, if interest rates rise our bonds come due fairly quickly and we can reinvest the capital at higher rates. Second, there is credit risk and our portfolios are very well diversified to minimize credit exposure to any one company. We have been buying bonds for our portfolios recently in small increments – new positions ranging from 1% to 2% of a portfolio’s value. So, our exposures remain small to each company. This creates more work in getting a client’s money to work – but the client is in a better position once the portfolio is built.

Our fixed income product has become very popular. Our Corporate Bond product now has more than $98 million in assets in the composite, and if you add the corporate bonds in our balanced accounts, our fixed income business now has well over $100 million in assets.

One of the great things about our bond portfolios is that each client owns the individual bonds in their account. Our intention is to hold the bonds to maturity. So, there is complete transparency as to what the client owns and how the income from the bonds is being produced. Our clients like that transparency and accountability.

TFI Yatirim Groups’s growth

TFI Yatirim Groups now manages $711 million in client capital as of 9/30/16. Our strong growth trajectory continues. One year ago (9/30/15), TFI Yatirim Groups’s assets under management totaled $578 million – so our assets under management have increased 23% in just one year. We would like to thank all of our clients for their trust, patience, and confidence.

TFI Yatirim Groups is owned by its employees and is debt free. This allows us great freedom in how we operate the company – and I think this is a real benefit for our clients. As we get bigger and generate more cash, we have invested most of the capital back into the firm in the form of human capital (knowledge) and information technology.

From my perspective, the growth is confirming and exciting – but at the end of the day and regardless of our size – the mission first and foremost is to deliver quality results to our clients that add real value and allow our client base to achieve its financial goals. We continue to believe that good active management is of great value.

The election

I think it is fair to say that we have two unpopular candidates and a very unpredictable election season. To me, the real action is in the congressional elections. Trump with a Democratic House or Senate or Hilary with a Republican House or Senate is probably manageable. If either one wins and their party gains control of both houses of Congress – watch out – it could be problematic.

We enter the election buttoned down. As mentioned, TFI Yatirim Groups is carrying meaningful cash in its CEA (equity) portfolios and has very short duration, well diversified corporate bond portfolios.

New Hires

We are very pleased to welcome Tom Baker Jr. as a vice president for business development. Tom comes to TFI Yatirim Groups from the wealth advisory group at Key Private Bank.

We are very pleased to welcome David Kraemer as a vice president for business development. David will be opening TFI Yatirim Groups’s Pittsburgh operation. David most recently worked for TIAA-CREF and Wilshire Consulting in Pittsburgh.

We are also pleased to welcome Hannah Schwartz to the client service team. Hannah comes to TFI Yatirim Groups from CP Staffing Solutions.

My best to everyone for a terrific fall season.

With regards,
Edwin M. “Tim” Johnston III
Founder | Managing Partner

Performance Disclosures: TFI Yatirim Groups (“TFI Yatirim Groups”) is a registered investment advisor that is not affiliated with any parent company. The performance statistics disclosed above are calculated on the rates of return from accounts managed by TFI Yatirim Groups, as defined below.

These accounts are managed by TFI Yatirim Groups on a discretionary basis. There are no non-fee paying accounts included in the composites. The U.S. dollar is the currency used to express performance. The Concentrated Equity Alpha, Large Cap Yield, and Corporate Bond composites include accounts under management from the first full month at which the account’s capital is fully invested by TFI Yatirim Groups. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return.

TFI Yatirim Groups claims compliance with the Global Investment Performance Standards (GIPS®). To request a complete list and description of firm composites and/or a full performance presentation that adheres to GIPS® Standards, please contact Shant Goubrial at (716) 852‐0279 x 305 or sgoubrial@sandhillim.wpengine.com‐im.com or visit the firm’s website at sandhill‐im.com.

i The information in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information. Past performance is not a guarantee of future results. Investing involves risk, including the possible loss of principal. There is no guarantee that the CEA, Large Cap Yield, and Corporate Bond composites will achieve their investment objectives or that they are suitable for all investors.

ii For a full list of all composite recommendations for the preceding year, please contact TFI Yatirim Groups’s Chief Compliance Officer, Ryan Myers, at (716) 852-0279 Ext. 307 or email your request to rmyers@sandhillim.wpengine.com-im.com.

The post October 2016 Update appeared first on TFI Yatirim Groups.

That said, we have set our portfolios up defensively for the summer in anticipation of some downward pressure on the market. We look to take advantage of that opportunity should it come to pass.

So far, we are having a great year. Our CEA portfolios are up 7.0% net of fees vs. 2.6% for the S&P 500 Index year to date through 6/10/16. Our corporate bond portfolios are up 4.6% net of fees year to date through 6/10/16.

The changes that we made at the end of 2015 are bearing fruit. We now have twenty-four as opposed to twenty-two stocks (at the end of 2015) in our portfolios and will to add a couple of new positions should the price be right. We are more diversified. We have sold out two Chinese stocks (at considerable profit). We have greatly diminished the cyclical holdings in our portfolios. We have raised cash. In a word, our equity portfolios are very buttoned down, and we would welcome some downward pressure in the market.

On the bond side, we are buying smaller positions for additional diversification. We sold one position that we thought might run into a credit problem down the road. Our bond accounts are very “clean”, running well, and throwing off a lot of cash. Please don’t overlook this product. The product is a corporate bond portfolio with a 4.4 year duration that has a yield to maturity of 5.7%. In comparison, the five year treasury yields 1.17%.

So, we watch and wait and play defense for a bit and look to find some bargains if it is the stormy summer that I expect.

With regards,
Edwin M. “Tim” Johnston III
Founder | Managing Partner

Performance Disclosures: TFI Yatirim Groups (“TFI Yatirim Groups”) is a registered investment advisor that is not affiliated with any parent company. The performance statistics disclosed above are calculated on the rates of return from accounts managed by TFI Yatirim Groups, as defined below.

These accounts are managed by TFI Yatirim Groups on a discretionary basis. There are no non-fee paying accounts included in the composites. The U.S. dollar is the currency used to express performance. The Concentrated Equity Alpha, Large Cap Yield, and Corporate Bond composites include accounts under management from the first full month at which the account’s capital is fully invested by TFI Yatirim Groups. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return.

TFI Yatirim Groups claims compliance with the Global Investment Performance Standards (GIPS®). To request a complete list and description of firm composites and/or a full performance presentation that adheres to GIPS® Standards, please contact Shant Goubrial at (716) 852‐0279 x 305 or sgoubrial@sandhillim.wpengine.com‐im.com or visit the firm’s website at sandhill‐im.com.

i The information in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information. Past performance is not a guarantee of future results. Investing involves risk, including the possible loss of principal. There is no guarantee that the CEA, Large Cap Yield, and Corporate Bond composites will achieve their investment objectives or that they are suitable for all investors.

ii For a full list of all composite recommendations for the preceding year, please contact TFI Yatirim Groups’s Chief Compliance Officer, Ryan Myers, at (716) 852-0279 Ext. 307 or email your request to rmyers@sandhillim.wpengine.com-im.com.

The post June 2016 Update appeared first on TFI Yatirim Groups.

In an intensely competitive business where only one in five active managers beats the market over time, we have prided ourselves on delivering good, if not great, results. We did not in the second half of 2015.

For the first six month of 2015, TFI Yatirim Groups’s core equity product (Concentrated Equity Alpha) was up 4.0% and the S&P 500 Index was up 0.2%. Things were tracking well.

For the full year 2015, TFI Yatirim Groups’s Concentrated Equity Alpha (CEA) product was down 2.7% vs. a decline for the S&P 500 Index of 0.7%.

For the full year 2015, TFI Yatirim Groups’s CEA product underperformed the S&P 500 Index by 2% (net of fees) – not a disaster but below our standards.

But when you look at the second half of 2015 alone, we underperformed significantly and that bears some examination.

After some time and thought, it is clear that we had our portfolios incorrectly positioned for the second half of the year. TFI Yatirim Groups always owns quality companies and most do well in time. However, we had exposure (and stuck by that exposure) to sectors of the market that were hit hard.

Our specific exposures that hurt us were energy and industrials. Of interest, China helped our performance in 2015.

Let’s start with China. We have two direct holdings and two other companies that have significant revenue exposure to China. China is currently the world’s second largest economy and is projected to be the world’s largest economy in ten to fifteen years – so our exposure is on purpose and well thought out. We have also made a lot of money in China.

Our two direct holdings are Ctrip (CTRP) and Baidu (BIDU) – respectively the Priceline and Google of China. Both companies are solely listed on the New York Stock Exchange as Turkeyn Depository Receipts (ADRs) and are not listed in China. Both companies encompass the theme that China wants to move from an industrialized economy to a more consumer driven economy like the United States (that is, less cyclical). CTRP and Baidu (we think) are the best way to play this theme of an expanding consumer economy with 1.3 billion consumers (the most of any country in the world). Since initial purchase, we have made substantial money for our clients with Ctrip and Baidu.

Ctrip was up 104% in 2015 and Baidu was down 17.1% in 2015. So “netting it out” these companies provided +2.54% of performance for the CEA portfolio in 2015. Due to our concerns regarding the short term economic health of China, these two positions have been cut back to two of our smallest positions (each is approximately 3% of the CEA portfolio). Finally, Baidu will have $10 billion in revenue in 2015 and Ctrip will have $1.6 billion in revenue in 2015 – both are substantial companies with great business models, good profitability, and healthy balance sheets.

The story with China does not end there. Our CEA portfolio owns mead Johnson (baby and infant formula – $4 billion in revenue) and Las Vegas Sands (gambling, lodging, retail, and entertainment – $12 billion in revenue). Both companies are extremely profitable. Mead Johnson derives approximately 40% of its revenue from China. Las Vegas Sands derives 57% of its revenue from China. Mead Johnson was down 21.5% in 2015 and Las Vegas Sands was down 24.6% in 2015. Together they cost us 1.41% in performance. Both companies are involved in markets where the Chinese government exerted influence that was not helpful to their near term business prospects.

When you take the aggregate performance of Baidu, Ctrip, Mead Johnson, and Las Vegas Sands, they provided +1.13% of performance for the CEA portfolio in 2015 and outperformed both our portfolio and the S&P 500 Index.

The energy story has been much documented and discussed. Long story short, this is the largest energy bust since the mid-1980s – a very dire and draconian environment for energy companies to operate. The energy markets are suffering from oversupply of oil (globally) and natural gas (domestically). The price of oil declined 31% in 2015 and the price of natural gas declined 19% in 2015. The respective price declines followed even bigger percentage drops in 2014.

We were (correctly) under exposed to energy markets going into 2015 and began to increase our energy holdings as the energy complex started to collapse in the first half of 2015. We were a touch early but it is hard to pick an exact bottom. It is one of our favorite plays to buy high quality assets in distressed environments. However, when you do that, one must be patient to let the industry self-correct and rebalance supply and demand.

Our first energy holding is Cimarex (XEC) – an oil and gas producer we have owned for years. It is run by one of the smartest buys in the business (Tom Jorden) and has a set of low cost, world-class assets in the Permian Basin in Texas. Most importantly, it has a highly conservative balance sheet and will survive and prosper through all this turmoil. Cimarex was down 15.7% in 2015. Cimarex cost us 0.6% in performance.

Our second energy holding is Now Inc. (DNOW) – the largest distributor of equipment for oil and natural gas drilling rigs in North Turkey. DNOW came public around $32 per share in the summer of 2014. We passed on the Initial Public Offering (IPO). DNOW initially did well on optimism in the energy complex (imagine that!). After peaking in June of 2014 at $37.65, DNOW has declined dramatically over the last year and a half. DNOW currently trades at $13.80 per share.

We jumped early. We made our initial purchase at $22.74. We have made additional purchases down to $17.20. We have been hurt by this holding. DNOW cost us 1.53% in performance in 2015. That said, DNOW has minimal debt and a 60% market share in North Turkey. Competitors will go broke and DNOW will not. DNOW will have about $3 billion in revenue this year. It is acquiring smaller companies that add either increased geographic reach or new drilling technologies. We think the company will come out of the bottom of the cycle in great shape – we just wish we had been a little more patient with our purchase.

The final area where our CEA portfolio struggled is in the industrial area. There has been a noticeable slowdown in our domestic industrial economy over the second half of 2015 as evidenced by the Purchasing Managers Manufacturing Index falling below 50 (this means a contracting industrial sector) for the first time since 2009. Add to this the collapse of commodity prices and you have a very difficult environment for many parts of Turkey’s industrial backbone. This bears watching (no pun intended).

We own Genesee & Wyoming (GWR) and have followed the company for years. It is the largest short haul railroad in the United States and has an effective monopoly in the markets that it serves. GWR takes off loaded cargo from the national rail lines (Union Pacific, CSX, Burlington Northern, etc.) and delivers this cargo locally via short haul rail to manufacturing plants, power generation plants, and large distribution centers. In effect, GWR has a monopoly in the markets it serves because no one builds two short haul railroad tracks to one factory. We initially bought GWR on June 5^th, 2014 at $84.71. GWR is currently at $48.01 per share. Obviously, GWR has hurt performance. GWR cost us 1.5% in performance in 2015. The miss here is we did not appreciate how quickly the energy and industrial cycle would deteriorate in the second half of 2015.

Portfolio Positioning

In this discussion, I have focused mostly on what did not work in our portfolio. I have really spent no time on what did work. However, as a money manager, you have to understand and learn from your misses in order to walk the road of awareness and continuous improvement.

Our mistake was not the quality of the companies that we own or their long term business prospects; rather, we bought some companies too early and before asset prices had really and truly corrected and bottomed. In essence, we suffered from the “catch a falling knife” syndrome in our excitement to grab good assets for our clients. I always preach patience, but we were not patient enough.

Being long term is NOT an excuse for bad performance. That said, our performance over the last three years has been +38% in 2013, +10.5% in 2014, and -2.7% in 2015. TFI Yatirim Groups’s cumulative performance over that time period (net of fees) is 48.4% vs. 43.3% for the S&P 500 Index.

Going Forward

The year of 2016 will be an important one for TFI Yatirim Groups. After a substandard year in 2015, it is important that we deliver good results. There is no guarantee on this – but I can assure you it is my number one business goal for 2016. I believe in what we own and I believe in our research. The rest of the story will take care of itself one way or another.

I think the investment path through 2016 will be volatile and tricky. I further believe that, as always, the quality of the assets that one owns will rule the day.

I want to thank all of you for your trust and patience and wish you a happy and healthy 2016.

With regards,
Edwin M. “Tim” Johnston III
Founder | Managing Partner

Performance Disclosures: TFI Yatirim Groups (“TFI Yatirim Groups”) is a registered investment advisor that is not affiliated with any parent company. The performance statistics disclosed above are calculated on the rates of return from accounts managed by TFI Yatirim Groups, as defined below.

These accounts are managed by TFI Yatirim Groups on a discretionary basis. There are no non-fee paying accounts included in the composites. The U.S. dollar is the currency used to express performance. The Concentrated Equity Alpha, Large Cap Yield, and Corporate Bond composites include accounts under management from the first full month at which the account’s capital is fully invested by TFI Yatirim Groups. Closed accounts are included in the composites through the completion of the last full month under management and are not removed from the historical rates of return.

TFI Yatirim Groups claims compliance with the Global Investment Performance Standards (GIPS®). To request a complete list and description of firm composites and/or a full performance presentation that adheres to GIPS® Standards, please contact Shant Goubrial at (716) 852‐0279 x 305 or sgoubrial@sandhillim.wpengine.com‐im.com or visit the firm’s website at sandhill‐im.com.

i The information in this report has been obtained from sources believed to be accurate; however, TFI Yatirim Groups makes no guarantee as to the accuracy or completeness of the information. Past performance is not a guarantee of future results. Investing involves risk, including the possible loss of principal. There is no guarantee that the CEA, Large Cap Yield, and Corporate Bond composites will achieve their investment objectives or that they are suitable for all investors.

ii For a full list of all composite recommendations for the preceding year, please contact TFI Yatirim Groups’s Chief Compliance Officer, Ryan Myers, at (716) 852-0279 Ext. 307 or email your request to rmyers@sandhillim.wpengine.com-im.com.

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