Our global fund had another positive month as most of our holdings turned in strong performances.

 

August

Year to Date

Since Inception (Annualized)

Inception Date: 6/6/2009

Motley Fool Independence Fund (FOOLX)

0.38%

21.54%

12.73%

FTSE Global All Cap Index

0.41%

15.17%

11.58%

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

The Independence Fund once again made progress in August, thanks to strong performances from the businesses we are partial owners of. Year to date, and since inception, the Independence Fund is beating its benchmark.

The best-performing holding was NMC Health, up more than 17%. NMC operates medical facilities and hospitals primarily in Abu Dhabi and Dubai. Historically, state-owned facilities have provided the majority of care, but population growth and healthcare consumption have outstripped what the state can provide. NMC has stepped in, with inducements from the state, to fill the gap, and the company has been building additional facilities and expanding care across the United Arab Emirates.

We met with NMC management and toured several facilities in 2014. That visit gave us confidence in management’s ability to execute its growth agenda, which it’s been pursuing since then. In August, NMC released first-half results that showed that its plan is working. New facilities generally take three to five years to fully mature, so we believe there’s more positive news to come, and we remain confident in the company’s reinvestment opportunities.

The worst-performing holdings for the month were Infinera, down 28%, and System1 Group, down 31%. Moves of this magnitude would typically suggest meaningful negative business developments, but our analysis suggests that’s not the case here. Longtime holding Infinera makes networking equipment for the telecommunications industry, and its long-haul business is largely on pause because two of its largest customers are intending to merge and aren’t spending on capex until it’s clear their tie-up will go through. Meanwhile, the metro/data-center market experienced some promising new customer orders, but the nature of the business is to start small and expand over time. On balance, we interpreted the quarterly developments as mildly positive and are comfortable taking a long-term view.

System1 is a U.K.-based marketing firm. It announced uninspiring first-half results, and given that the stock had run up considerably in previous months, the fall from those highs was understandable. Later in the month, behemoth competitor WPP announced results that echoed what System1 had to say, confirming our belief that these results are more likely to have been a cyclical hiccup than a series of company-specific problems. We’ll be digging further for the truth here.

During the quarter, we sold one holding and made one new purchase. First, we sold Sberbank. We like how the Russian bank conducts business, and we often held it up as an example of how stakeholder-centric opportunities exist all over the world. But we try to maintain discipline in our purchase and sale decisions, and that’s especially true with mediocre businesses such as banks. Sberbank had reached our estimate of value, and we had a better place for the capital.

Second, we purchased PayPal Holdings. In addition to using its size, scale, and technological know-how to facilitate digital payments, PayPal has dedicated itself to being a trusted platform that all players can use, from merchants and payment processors to technology developers and everyday buyers. We’ve been impressed with the company’s approach to partnership, the execution of its strategy, and the continued strength of its business. The digital-payment industry is rapidly changing, and PayPal has demonstrated the agility necessary to remain a leading player.

 

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