Our portfolio is at least two-thirds to three-quarters driven by holdings with a strongly cyclical bent (whose share prices have recently started to come back into the market’s favour).
The market hints at the likely potential for a major post-Covid-19 macroeconomic recovery, partially driven by government-induced spending programs in heavy infrastructure projects which will have a vastly positive impact on many of our portfolio holdings.
Our portfolio in its current composition responds and correlates strongly with a rising yield curve in benchmark sovereign bonds (which it has recently in most hard currency countries).
The market has started to consider a reflationary scenario with rising prices in the tangible, hard-asset parts of the economy, which will significantly benefit a majority of our portfolio holdings.
Despite the recent rebound in our portfolio performance, the estimated margin of safety which we conservatively calculate for our portfolio is still very wide. I.e., the potential for further portfolio appreciation remains plentiful.
Notwithstanding the arduous period for disciplined deep value investment programs like ours since the unfolding of the sub-prime mortgage bust in 2007 and the ensuing peripheral sovereign debt and then virus-related economic crises, the long-term compounding in our portfolio's total net rate of return is intact, solid and very competitive.
A dedicated deep value portion introduces a high-impact diversification element into an investor’s overall investment program.
We are convinced that the incorporation of a meaningful deep value portion would render a substantial source of return to any investor’s long-term net savings targets.