The International Select Portfolio

As another Olympic Games come to a conclusion, questions have begun to arise surrounding what the future holds for Brazil. With a high inflation rate and an economy expected to contract by around 3.8%, the country finds itself in the worst recession since the 1930s. Add to this an atmosphere of political unrest, with Brazil’s new interim president Michel Temer being booed at the Opening Ceremony, and it is understandable that many are contemplating Brazil’s next few years as bleak. But it is not all bad news. The Games went remarkably smoothly, and have reintroduced a sense of national pride which had recently been forgotten. Brazil remains Latin America’s biggest economy and planned projects by Shell, Santander, and Goldman Sachs to invest further in Brazil mean there are reasons to feel positive about the future.

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In Hong Kong last week, a new mechanism was introduced to help mediate extreme volatility in the market. The new circuit breaker is there primarily to prevent huge swings and spikes in price arising from trading errors and the like. It restricts a stock from moving more than 10% per 5-minute period once a session. The introduction of this Volatility Control Mechanism brings Hong Kong’s stock market into line with its global peers.

Last quarter, our International Select Portfolio returned -0.58% (pure gross) and -1.04 (net) versus -1.19% for the benchmark. For three years the portfolio returned 9.47% (pure gross) and 7.49 (net) versus 2.52% for the MSCI-EAFE Index. Stock selection and country weightings in Hong Kong hindered portfolio performance, where country weighting in Brazil helped, though it remains to be seen whether this continues to be the case.

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The Henry James International Select Portfolio, is a high conviction SMID Capitalization, at purchase, international core portfolio. The investment process is an objective, bottom-up, quantitative screening process designed to identify and select inefficiently priced international stocks, under $10 billion, with superior return versus risk characteristics. This is combined with quarterly, top-down risk mitigating country allocation system rebalancing, in which the management team over weights highly ranked countries and under weights lower ranked countries. Typically, the portfolio invests in 50 to 70 stocks that pass our disciplined fundamental and quantitative criteria and we let our winners run. The primary performance benchmark is the MSCI-EAFE.

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To learn more about this, or any of our portfolios, please get in touch via email at info@hj-intl.com, by telephone on 917-951-5170 or by heading to our website.