January was a great month for emerging markets, and our fund performed quite well.

 

January

2018 Year-to-Date

Since Inception (Annualized)

Inception Date: 11/1/2011

Motley Fool Emerging Markets Fund (TMFEX)

11.42%

11.42%

8.82%

FTSE Emerging Markets All Cap China A Inclusion Index

8.19%

8.19%

6.87%

For a standardized list of performance for the Emerging Markets Fund, please click here. For fund holdings, please click here.

January was an extraordinarily good month for stocks, especially for Emerging Markets. That’s easy to forget after the way February has started.

The 11.4% one-month return for the Motley Fool Emerging Markets Fund looks more like the returns you’d expect over the course of a year. In fact, it was even better than the 8.8% annualized return the fund has returned since its inception. Stocks don’t move in a straight line, and you should expect fits and starts leading to long-term performance, but this past month was extreme. Fourteen of the fund’s 30 companies returned more than 10% during the month, and only two -- TAV Havalimanlari and Georgia Healthcare Group -- had a negative return.

The best performer for the month was longtime holding Douzone Bizon, up 44%. The software company has been able to execute well on its vision, growing its cloud business rapidly while seeing solid growth from its core enterprise resource planning software. It’s managed to do that by staying focused on its home market of South Korea, where it’s been able to achieve a critical mass of market share. Keep your eyes peeled for any signs of Douzone during the Olympics; the company is an “Official Supporter” of the Winter Games.

Other top performers during the month included MercadoLibre (+23%), NMC Health (+22%), Top Glove (+21%), Mitra Adiperkasa (+19%), Alibaba Group (+19%), and Yum China (+16%). We first bought Yum China in December, and it’s gotten off to a strong start. We also benefited from outsize gains from our largest holdings. MercadoLibre, NMC Health, and Top Glove were already three of our four largest positions at the beginning of the month. Our biggest position, Tencent Holdings, also did quite well, with a 14% return during the month.

While the individual company performances were strong, our broader allocations didn’t really help us during the month. Energy and financials provided the best sector returns for our benchmark, and we are underweight both. It was also a very strong month for China, where we remain underweight relative to our benchmark. Nonetheless, our companies did well enough that we outperformed the benchmark’s 8.2% January return. Given the low number of holdings in our fund, you should expect to see months where our returns differ greatly from our benchmark; the comparison will be more fair over longer time frames.

We did very little trading during the month, adding to our existing position in Chinese travel broker Ctrip.com International. Don’t mistake this lack of activity for lack of diligence. We are constantly considering new investment ideas while re-evaluating our current positions. Many of the companies we hold are now trading at very different valuations from where we initially purchased our shares, and it’s our main responsibility to ensure that these are still the best places for your money. But that’s the great thing about a process that seeks to identify high-quality growth businesses -- if we get the initial evaluation correct, these stocks can compound their returns for years.

The Emerging Markets Fund changed its benchmark from the FTSE Global All Cap ex-US (Fair Value 16.00 EST) Net Tax (US RIC) Index to the FTSE Emerging Markets All Cap China A Inclusion (Fair Value 16.00 EST) Net Tax (US RIC) Index on February 28, 2017.

The Emerging Markets Fund changed its name from The Epic Voyage Fund on February 28, 2017.

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