Our global fund remains positive in 2018, but trade-related risks remain a consideration in markets around the world.

 

Q2-2018

Year to Date

Since Inception (Annualized)

Inception Date: 6/6/2009

Motley Fool Global Opportunities Fund (FOOLX)

-1.07%

6.21%

13.12%

FTSE Global All Cap Index

0.43%

-0.18%

11.39%

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

In the face of escalating trade tensions, global equity markets remain resilient. Without a doubt, this raises risks for stock investors. However, the broad strength of the global economy has provided an impressive cushion for trade-related risks. Global GDP growth expectations remain strong, three quarters of OECD (Organization for Economic Cooperation and Development) countries are engaged in financial easing, and inflation remains moderate. Combined with good company results and fundamentals, the FTSE Global All Cap Index inched forward 0.43% in the second quarter. The MFAM Global Opportunities Fund retreated a touch in the second quater, falling -1.07%. But year to date, and since inception, the Global Opportunities Fund is nicely ahead of its benchmark.

The best-performing stock during the second quarter was Align Technologies (up over 40%). Align makes clear aligners and scanners that help orthodontists straighten their patients’ teeth. In May, Align held an investor day to provide updates on its business, and there were many highlights. The company told investors that its products can address at least 70% of patient cases, and that continued R&D efforts will soon push that to 80% to 85% of cases. Align continues to gain share (at the expense of metal braces) in the teen market and establish its presence with orthodontists outside the United States. Accordingly, management raised its three- to five-year revenue growth target from 15%-25% to 25%-30%. Even at this torrid growth rate, the company’s financial performance and strategic choices have been excellent.

The worst-performing stock during the quarter was Multiplus (down nearly 20%). Brazilian markets were down around -10% and its currency continues to be weak. However, Multiplus is having some of its own issues to boot. Multiplus operates loyalty programs for airline and financial clients in Brazil. The company runs a highly profitable, asset-light business and usually pays out all of its earnings in a big dividend. While the major macro drivers for this business appear healthy (increased use of credit cards and increases in air travel), Multiplus has been losing market share to competitors. Its primary airline partner has also been experimenting with new pricing mechanisms, which are impacting Multiplus. Thankfully, this is a small position. It is critical for the company to stem share losses by better communicating the value of its loyalty program compared to competitors. We will keep a close eye on this.

During the quarter, we made three notable new purchases for the Global Opportunities Fund. Earlier this year, I wrote about my biggest mistake of 2017. I overcame my anchoring bias, and we purchased commercial real-estate titan Jones Lang LaSalle. Since we originally debated the business for investment, the company has provided evidence in support of our thesis – namely that strategic data and technology investments are accelerating (a key advantage over smaller players and suggestive of widening advantages), and that efforts to grow the recurring portion of revenue are achieving great success.

We also purchased Tupperware Brands. Tupperware is best known for its plastic storage containers, but the company is a robust door-to-door sales organization with strength in emerging markets that offers a wide range of products for healthy food preparation and storage. The secret to success for Tupperware is the combination of its sales force – which provides gainful employment and social benefits for often repressed segments of the population – and clever products that deliver market-specific solutions. This is a company we have followed for close to a decade. First-quarter performance was chock-full of known trouble spots, but the market punished shares anyway. Distinct issues in Indonesia, Brazil, and France all seem to be temporary, and for long-term investors like us, shares offered a great opportunity.

Finally, we purchased Atlassian, an Australian company that makes a variety of team collaboration software products. We believe Atlassian is a special company that is positioned to capitalize on the increasing role of software development in every business, the proliferation of knowledge work worldwide, and the fact that technology is enabling increasingly remote workers. Atlassian spends more on R&D (as a percentage of sales) than most companies, with the intention of making its products so easy to use that they don’t require a sales force. It prices products low to encourage trial (again, so it doesn’t require a sales force), and it rapidly rolls out new features to make its products more useful and even easier to use. This formula has proven to be an effective business model, and combined with a strong culture, founder guidance, and fanatic customers, the future looks bright.

We sold recreational vehicle component maker LCI Industries. While we have immense respect for the proven leadership at LCI, we were simply able to allocate your capital to more promising investments (as noted above). We also sold Ionis Pharmaceutical, a promising but speculative drugmaker. Like any drugmaker, there is a lot of boom and bust potential for new compounds. Recent trial data made us question the release schedule, and attendant cash flow profile, for Ionis’ upcoming drugs. This uncertainty changed the company’s risk profile and made us question our initial launch assumptions enough to sell.

We manage focused portfolios, and the bar for capital commitment must remain high. When opportunities arise to improve portfolio quality, return potential, and risk exposures with a high level of confidence, we take action. Our aim is to construct a portfolio of the highest-quality businesses and attractive investment opportunities across the globe. It is an ongoing effort, and we are pleased with where we stand.

The Global Opportunities Fund changed its name from The Independence Fund on December 31, 2017.

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 6/30/2018, the Motley Fool Global Opportunities Fund (Investor shares) was rated in the World Stock Funds category, receiving a four-star rating among 721 funds over a three-year period and a four-star rating among 596 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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