Our fund was slightly down in March, but remained positive year-to-date.

 

March

2018 Year-to-Date

Since Inception (Annualized)

Inception Date: 11/1/2011

Motley Fool Emerging Markets Fund (TMFEX)

 -0.91%

6.94%

7.90%

FTSE Emerging Markets All Cap China A Inclusion Index

 -1.16%

1.89%

5.70%

 

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

 

If February was a reminder that stock markets go down as well as up, March was all about reinforcing that lesson. During the month, there were plenty of ups and downs, some pretty dramatic, but at the end of the day, the market was only slightly below where it started – and is still up year to date.

Although March marked the second consecutive month of negative returns for your Motley Fool Emerging Markets Fund, it was the third month your fund beat its benchmark. The Emerging Market Fund’s 0.91% decline was smaller than the 1.16% decline in the benchmark, and it was a marked improvement from February’s slide.

Two months of negative returns can make it seem like we’re reaching for silver linings in these monthly updates, but those of you familiar with our long-term focus know moves in stock prices over any 30-day period will be noisy and of little concern. We’re far more focused on the strategic moves of our companies and changes to their competitive advantages.

The largest drags on performance came from Latin American online marketplace Mercadolibre (down 8.1%), Mexican microlender Gentera (-13.9%), Chinese tech giant Tencent (-5.2%), global port operators International Container Terminal Services (aka ICT, -9.1%), and DP World (-8%).

Looking at that group of laggards, your portfolio team sees little cause for concern.

We continue to marvel at Tencent’s dominance of the online ecosystem in China and are closely watching its attempts to expand its reach beyond China’s borders into Southeast Asia and beyond.

Nobody just brushes off Amazon, and that company’s recent moves in Mexico and Brazil are definitely worth watching, but we think MercadoLibre’s established position and quality management team give it an unusually strong position against Jeff Bezos’ online goliath.

Similarly, there is the potential that a trade war sparked by U.S. tariffs could choke off the recovery in global trade we’ve seen this year, but we believe the long-term outlook for ICT and DP World, and the traffic at their ports, remains strong.

Gentera’s story is less clear-cut, and it is facing external threats (the aforementioned potential trade war, domestic politics, and rising competition) and an internal transition, so there are multiple reasons to explain the stock’s persistent slide this year. Like the port businesses, we believe political turmoil is a temporary threat, but we are watching closely for signs of progress as they transition from a high-growth lender to a more mature business. The character of this transition may determine if we continue to invest in this company.

On the positive side, Duzon Bizon made it three-for-three in 2018 as the top performing stock in the fund, up 6.5% in the month. It was joined by BGEO Group and Credicorp, banks in the Republic of Georgia and Peru, respectively, both returning 4.9% in March. Closing out the top performers, Safaricom, the largest telecom in Kenya, gained 4.2%.

We made two purchases during March, adding to our positions in Alibaba and Baidu, although both remain undersized positions in the portfolio.

Note: The Morningstar RatingTM for funds, or 'star rating', is calculated for managed products (including mutual funds, variable annuity and variable life subaccounts, exchange-traded funds, closed-end funds, and separate accounts) with at least a three-year history. As of 3/31/2018, the Motley Fool Emerging Markets Fund (Investor shares) was rated in the Diversified Emerging Markets Funds category, receiving a five-star rating among 666 funds over a three-year period and a five-star rating among 474 funds over a five-year period.

Exchange-traded funds and open-ended mutual funds are considered a single population for comparative purposes. It is calculated based on a Morningstar Risk-Adjusted Return measure that accounts for variation in a managed product's monthly excess performance, placing more emphasis on downward variations and rewarding consistent performance. The top 10% of products in each product category receive 5 stars, the next 22.5% receive 4 stars, the next 35% receive 3 stars, the next 22.5% receive 2 stars, and the bottom 10% receive 1 star. The Overall Morningstar Rating for a managed product is derived from a weighted average of the performance figures associated with its three-, five-, and 10-year (if applicable) Morningstar Rating metrics. The weights are: 100% three-year rating for 36-59 months of total returns, 60% five-year rating/40% three-year rating for 60-119 months of total returns, and 50% 10-year rating/30% five-year rating/20% three-year rating for 120 or more months of total returns. While the 10- year overall star rating formula seems to give the most weight to the 10-year period, the most recent three-year period actually has the greatest impact because it is included in all three rating periods. Past performance is no guarantee of future results.

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