Our international fund surged during the first half of the year.

 

June

2017 Year to Date

Since Inception, Annualized

(Inception Date: 11/1/2011)

Motley Fool Emerging Markets Fund (TMFEX)

0.37%

18.56%

6.53%

FTSE Emerging Markets All Cap China A Inclusion Index

0.69%

14.62%

3.59%

FTSE Global All Cap ex-U.S. Index

0.33%

14.64%

7.02%

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

The Motley Fool Emerging Markets Fund had a quiet June, capping a positive first half of the year. The fund returned more than 18.5% in the first six months of 2017, outpacing its benchmark by nearly 4 percentage points. While we slightly trailed the index during the month, we are nonetheless pleased with our results.

In May, our outperformance was driven largely by technology stocks, and despite a weak June in that sector, our investments still held up well. In fact, we invested a bit more cash into tech companies in June, adding a few more shares of Ctrip.com International and initiating an investment in Alibaba Group. These two internet companies give us more exposure to a growing consumer class within China. Ctrip.com, an online travel agency valued at nearly $30 billion, has a dominant position and a large competitive advantage in an industry with plenty of room for growth. Alibaba Group is an even larger company that has its hands in all parts of Chinese e-commerce through various platforms, including Tmall and Taobao Marketplace. The $380 billion company often invites comparisons with Amazon.com and MercadoLibre, and it even has a cloud service similar to Amazon Web Services. It’s an ultra-high-growth company, expected to grow revenue by at least 45% this year. However, because Alibaba does carry a high degree of risk, it represents a relatively small position size for us.

We sold a few shares of Tarpon Investimentos in June, and we also closed out our investment in Lippo Malls Indonesia Retail Trust, a Singapore-based real estate trust whose sole business is owning malls in Indonesia. For several years we enjoyed its hefty dividend, which currently offers a yield just below 8%. But with the shares trading close to their net asset value, we saw limited additional upside beyond the dividend and felt your dollars could be better deployed elsewhere.

Our best-performing stock in June was Almarai. This Saudi dairy company increased nearly 19%, after index provider MSCI announced that Saudi Arabia is being considered for inclusion in the MSCI Emerging Markets Index. While we don’t know when the country will be added, if it will at all, the broad consensus is that it will happen next year, at which point many passive index investors will dutifully add stocks such as Almarai to their portfolios. We view Almarai’s recent price increase as only a case of short-term volatility, and we continue to invest in high-quality businesses with attractive long-term prospects.

Other top performers during the month included Mexican airport operator Grupo Aeroportuario del Pacifico (+12%), Turkish airport operator TAV Havalimanları (+10%), and Turkish soft-drink bottler Coca-Cola Içecek. At the other end, our worst performers were Sberbank (-11%), Tarpon Investimentos (-12%), and Nippon Indosari Corpindo (-15%).

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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