The fund outperformed in March, mainly due to our international holdings.

 

March

Year to Date

Since Inception (Annualized)

Inception Date: 6/16/2009

Motley Fool Independence Fund (FOOLX)

2.53%

8.33%

11.79%

FTSE Global All Cap Index

1.31%

7.07%

11.20%

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

The Independence Fund outperformed its benchmark in March and is beating it both year to date and since inception. I feel as if we say it every month, but we don’t think this means very much. What matters more is that our portfolio is increasingly positioned to generate satisfactory longer-term performance that helps you meet your goals, and that the wins we notch are achieved without taking undue risk. We have good news to report on that front, as our team made a few changes that we think improve the quality, growth prospects, and return potential of the portfolio.

We sold three positions during the month. Loews is a collection of so-so businesses run by smart people. Our focus on management, culture, and incentives and a commitment to paying reasonable prices led us to Loews, but the underlying businesses aren’t hold-forever-quality, so as the stock price began to reflect our estimate of value (Loews is up more than 20% over the past year), we sold.

Intel is a business we know well and one we feel is highly advantaged. But when push comes to shove, it is a cyclical business that we prefer to own it when its price reflects pessimism in the cycle. That is not the case currently, and we think there are better places for our capital.

Our final sell was Horizon Global. Horizon, spun out of former holding TriMas in mid-2015, is a beautifully boring business that makes towing and trailering equipment for the automotive aftermarket, and the thesis revolves around management’s ability to make operational improvements to grow cash flow. This is a fine investment, but more than 20% of our funds already reside in the consumer-cyclical sector. As we learned more about the path to improvement at Horizon, it became clear that we weren’t as confident in the risk-reward as we were in several of our other consumer cyclical businesses, such as Amazon.com, Ctrip.com, and Starbucks. With a lowered confidence and the belief that Horizon didn’t offer much in the way of diversification, we chose to sell and focus our efforts and capital elsewhere.

With the capital raised from those sells, we added to a few existing positions and made one new investment, in XPO Logistics. XPO was built by Brad Jacobs, a serial entrepreneur with a track record of building valuable businesses by consolidating fragmented industries in which logistics is critical to success. The plan at XPO is just that, except that logistics isn’t just important; it is the entire business. Jacobs funded the venture himself, assembled a team of industry veterans and acquisition specialists, and set off in 2011. Today, XPO generates about $15 billion in revenue, and we anticipate cash flow growth as the team integrates the businesses purchased over the years, takes share from competitors, and benefits from a healthy U.S. economy.

Returns in March were driven by our international holdings. The weighted average return of our international holdings was more than 2%, compared with roughly flat for our domestic holdings. Five stocks returned greater than 10% during the month, and four of those were international holdings: International Container Terminal Services (+18%), BGEO Group (+16%), Mitra Adiperkasa (+11%), and Horizon Discovery (+10%). We don’t pretend to know when our international holdings will outperform, or when our domestic holdings will outperform. Instead, we spend our time finding, analyzing, and assembling a cohesive set of extremely high-quality businesses, capable of attractive cash-flow growth, that offer ownership at reasonable prices regardless of the geographic location of their headquarters. 

 

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