Newsletter Volume 1, Issue 5

Volume 1, Issue 5: October 10, 2018

MACH 100 LP NEWSLETTER

INVESTMENT RETURN SUMMARY

Mach 100 LP Investment Performance Results are presented gross and net. Net results are for an investor since inception, net of 1% management fee and 25% performance allocation with a “high watermark” threshold. Individual investor’s performance may vary based on time of investment and class of investment. Since inception returns are from fund inception 4/2018.                                                                                                                                                                                                   See Important Performance Disclosures

PERFORMANCE COMPARISONS

Dear Friends, for the month ending July 30, 2018, Mach 100 LP was Up 0.95%. This compares to the S&P 500 that was up 3.60%, the NASDAQ Composite up 2.15% and the Russell Microcap index which was down 0.07%. Year to date (YTD), (beginning mid-April for Mach 100 LP) Mach 100 LP is up 17.95%. This compares to the YTD performance of the S&P 500 that is up 5.34%, the NASDAQ Composite up 11.13% and the Russell Microcap index which is up 10.64%.

 EQUITY MARKET OBSERVATIONS

During the month of July, positive investment returns were concentrated in the fewest names we have seen, since we began the Fund in April. There were many trading days in July where we saw the NASDAQ 100 (the 100 largest companies by market capitalization) outperforming the NASDAQ Composite by a Factor of 2. Even more interesting: Most of the U.S. equity market returns, year to date, have been generated by 5 stocks, collectively referred to as FAANG (Facebook, Amazon, Apple, Netflix and Google); and 71% of the S&P 500’s returns for the first half of 2018 were generated by just 3 technology stocks, Amazon, Netflix and Microsoft. The lack of breadth of performing equities in the U.S. markets is as narrow as we have ever seen. Without FAANG or a mix of technology stocks including at least a few components of FAANG, the equity markets are actually down for the year.

Such is Not the case for the small capitalization and micro-capitalization tiers of U.S. equities; and the world for that matter. Small cap and micro cap equites are up across the board. Breadth is very wide in terms of performance. For example, the Russell Microcap Index (RMI) consists of 1,550 small cap and microcap companies. The RMI is far broader than both the NASDAQ 100 and the S&P 500 and represents just 3% of the overall U.S. equity market by capitalization. In dissecting the RMI, we find, to date, the more securities included in measuring their performance, the higher the returns. This performance phenomenon for the Russell Microcap Index (and therefore small cap and micro cap U.S. securities) is the opposite of the “FAANG effect.” We believe there are still significant opportunities to generate compelling investment returns in the small and micro capitalization tiers. Go small, or go home!

SECTOR ALLOCATION

Currently (approximately as of this writing) the Fund has positions (which are always subject to change without notice or obligation), long and short, in the following industry sectors and subsectors: aerospace/defense (photon based energy for manufacturing and defense); leisure (transaction processing for sports betting); medical device (fertility, home infusion and disposables); nutraceuticals; software (property and casualty insurance, mobile gaming and social apps); retail apparel and steel production.

LONG/SHORT PORTFOLIO EXPOSURE

Currently, (approximately as of this writing) the Fund’s long/short portfolio exposure (which is always subject to change without notice or obligation), the Fund’s is 75% Long, 2% short and 23% in cash. Therefore 73% Net Long.

PORTFOLIO COMPOSITION

Mach 100 LP is a global small cap and micro cap, concentrated, Fund. When Steve and I started our first hedge fund in 1994, our hedge fund’s portfolio was almost exclusively U.S. companies with an occasional Canadian company, that usually traded in the U.S. Twenty Four years later, Mach 100 LP, with a very similar strategy to our successful, original fund, DNB Fund Partners LP, is global. Because of all of the technological advancements in Fintech (financial technology), we have the ability to trade almost any [read – Any] market in the world, with direct and real time access those international markets; without the need to rely on American Depository Receipts (ADR’s) or brokerage intermediaries. We possess just as much news, information, analytics, as international investors in their local markets; and sometimes, due to the extremely sophisticated analytics and trading platforms that we utilize, we have more information than they do. As one might surmise, advantages are a function of information via research, analytics and trading technology (access and execution). In terms of speaking with companies located one or two oceans away, they are generally delighted to have interest from U.S. investors.

Today, we have positions in international companies located in Finland, Italy, Canada and Israel. Some of these companies trade on U.S. exchanges and markets and some only trade on their respective foreign exchanges. Interestingly enough, we started researching a company located in Oslo, Norway. The Company just relocated its main manufacturing operations to San Jose, California with its headquarters still located in Oslo. While it theoretically trades in the U.S. on the Over The Counter market, there is practically speaking, no trading volume in this security on the Over The Counter market; In other words, in the U.S. it cannot be bought or sold. In contrast, on the Oslo, Norway market, trading volume is heavy. Today for example it traded almost 10 million shares. Accordingly, if you want to invest or trade this company, you need to trade it on the Oslo, Norway exchange. Whether its Amazon delivering packages to 3rd world countries or investors trading international markets with direct access in real time, the world has definitely become economically flat.

David N. Baker and Steven Shum

 INVESTMENT THESIS

MACH 100 LP seeks to generate superior returns by entering positions with high return risk profiles at the inflection point of their catalysts to capture discovery premium and multiple expansion.

FUND DESCRIPTION

Mach 100 LP is a global small and micro-capitalization, non-correlated, equity focused hedge fund possessing concentrated positions and capitalizing on discovery premium and information arbitrage (disparities from publicly available information). The Fund’s investment objective is to generate absolute returns that are largely alpha (the active component of investment returns that are in excess of the financial markets’ movement as a whole). The Fund utilizes fundamental quantitative and qualitative analysis, assessment of securities and broad market behavior, trading psychology and return risk profiling to determine portfolio exposure and select investments across asset classes, instrument types, industry sectors and geographies. Managed by industry veterans, the Fund is designed to generate consistent, positive investment returns with low net portfolio exposure and lower correlations than typical equity market benchmarks. As a pooled investment vehicle, the Fund may employ a diverse combination of equity, equity arbitrage, equity linked derivatives, debt, spot metals and other investment and hedging instruments (including cash) in order to achieve its objectives. The Fund’s long portfolio focuses upon emerging growth companies across the small and micro-capitalization tiers (~$50 million to $2 billion). Its short portfolio focuses upon fundamentally flawed companies and management teams. Our strategy presents both the opportunity to achieve higher gains, as well as creating unique challenges that require significant skill, as well as deep and broad experiences within these volatile capitalization tiers; and of paramount importance, the right trading psychology. Mach 100 LP believes it has the right team, strategy and tactics to successfully capitalize on these opportunities to produce superior investment returns.

David N. Baker

Managing Principal

Mercadyne Fund Management LLC

6565 Spencer St., Suite 205

Las Vegas NV 89119 

dnb@mercadyne.com

           415.297.4749

Disclaimer

Mercadyne Funds, LP (“Mercadyne”) is not currently registered in any capacity in the financial services industry, and the information that accompanies this disclosure, as well as any other information provided by Mercadyne, should not to be construed as financial advice, investment advice or a solicitation to buy, sell or hold any particular security. Mercadyne makes no warranty, expressed or implied, as to the accuracy or completeness or fitness for a purpose (investment or otherwise), of the information provided in its publications, including its websites and social media posts, including video, audio or text. The published information has been sourced from publicly available sources, but Mercadyne does not guarantee the accuracy, timeliness, completeness or correct sequencing of the information, and does not warrant any results from use of the information. Readers are encouraged to consult their personal financial adviser before making any decisions to buy, sell or hold any securities mentioned in any materials from Mercadyne. Investing in securities of emerging growth companies or emerging growth economies is highly speculative and carries an extremely high degree of risk. It is possible that all of an investor’s invested capital may be lost or impaired due to the speculative nature of the companies profiled. In addition, Mercadyne’s personnel and/or investment vehicles may have or take long or short investment positions in the companies discussed in the accompanying information (the existence of any such positions will be disclosed when applicable). Mercadyne encourages readers to invest carefully and to read the investor information available at the websites of the Securities and Exchange Commission (“SEC”) at www.sec.gov and/or the Financial Industry Regulatory Authority, Inc. (“FINRA”) at www.finra.org/investors. Mercadyne is not responsible for any error, mistake or shortcoming that may be occasioned at the time of publishing of the information in this publication, any other Mercadyne publication, or its web site(s) and is not obligated to, and undertakes no duty to, update and/or correct any information. No liability is accepted by Mercadyne for any direct, indirect or consequential loss arising from the use of the information that accompanies this disclosure. Mercadyne expressly disclaims any fiduciary responsibility or liability for any consequences, financial or otherwise arising from any reliance placed on the information provided. The information that accompanies this disclosure is subject to change without notice. While the accompanying information may include details relating to Mach 100, LP (the “Fund”), a private investment fund managed by Mercadyne that relies to SEC Rule 506(c) to maintain a “private placement” of its securities, an offer of such securities may be made only by the delivery of the Fund’s Confidential Private Placement Memorandum specifically addressed (either on the cover page or in an electronic mail message) to the intended recipient.

By |2018-12-17T19:45:09+00:00December 7th, 2018|Unaccredited Newsletters|0 Comments