Newsletter Volume 1, Issue 6

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VOLUME 1, ISSUE 6: AUGUST/SEPTEMBER 2018

Dear Friends,
For the month ending August 31st, 2018, Mach 100 LP was Up 10.34% Net. For the month ending September 30th, 2018, Mach 100 LP was down 1.88% Net. This compares to the S&P 500 that was up 3.03% and .43% for August and September respectively, the NASDAQ Composite up 5.71% and down 0.78% for August and September, respectively; and the Russell Microcap index which was up 4.30% and down 3.26% for August and September, respectively. Year to date (YTD) through September, (beginning mid-April for Mach 100 LP) Mach 100 LP is up 30.65% gross and 22.55% net. This compares to the YTD (through September) performance of the S&P 500 that is up 8.99%, the NASDAQ Composite up 14.09% and the Russell Microcap index which is up 11.64%.

MACH 100 LP INVESTMENT PERFORMANCE 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.

MACH 100 LP INVESTMENT PERFORMANCE COMPARISON

Mach 100 LP Investment Performance Results are presented 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.

EQUITY MARKET OBSERVATIONS

August domestic equity markets were very strong, with most major indices reaching record highs (despite concerns about global trade and international market tensions). Second quarter S&P earnings grew 25% for the second consecutive quarter fueling stock gains. August 2018 was the best performing August since 2014. More importantly, August 22, 2018 marked the longest running bull market in the history of U.S. equity markets, with 3,453 days without a 20% decline or greater. September was complete with many contradictions when examining the indices. Dow industrial and transportation indices were up, while the NASDAQ 100 and Composite were slightly down. The five FAANG stocks (Facebook, Apple, Amazon, Netflix, Google) now represent 11% of the S&P 500 and 50% of the NASDAQ 100 respectively, by market capitalization. Therefore, to really understand what is happening in the U.S. equity markets, one must bifurcate FAANG from the balance of the equity markets; such that the analysis and equity performance of FAANG is only one perspective; and the other, arguably much more important perspective, is to study the remaining 5700 NYSE and NASDAQ securities and 10,499 OTC securities.

GROUP AND SECTOR ROTATION

As we like to remind our readers, group and sector rotation is an important part of a comprehensive investment process, as it is a direct reflection of money flow and therefore supply and demand (in the form of trading volume) of various investment instruments (e.g. stocks, bonds, ETF’s, metals, currencies, etc.); and volume is the fuel of price. Currently, the strongest sectors are: Telecom (wireless services); Retail (discount and variety, drug stores, apparel, shoes and auto parts); Tobacco; Healthcare (long term care, outpatient and managed care); Medical Products; Media (radio and tv); and Food. The weakest sectors consist of: Banks (super regional); Chemicals (plastics); Machinery (construction and mining); Auto/truck original equipment manufacturers. Building (cement and concrete, wood products, residential and commercial). We believe the aforementioned weakest industry groups are indicative that the economy may be beginning to slow.

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 77% Long, 6% short and 17% in cash. Therefore 71% Net Long.

SECTOR ALLOCATIONS

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); agriculture; automotive; fintech (financial technology); leisure (transaction processing for sports betting); media (digital advertising and content distribution); medical device (fertility); software (mobile gaming and social apps); retail apparel and steel production.

PORTFOLIO COMPOSITION

Mach 100 LP is constantly making adjustments to its portfolio composition to position the fund to capture the most alpha with the least correlation to the indices. To do this, we assess and monitor many factors, including but not limited to: global market conditions (equity, debt, commodity, currency markets); trade (tariffs and taxes); portfolio exposure (net long/short); sector allocation; position concentration; and hedges (percentage weight and types of hedging instruments). While we are security specific with our security selection process, the aforementioned factors (supplying risk or providing potential return), some which are macro in nature, do affect individual companies and other securities, including those in our portfolio; and as such, they and their effects on the portfolio must be considered at all times.

-David N. Baker and Steven Shum

FUND DESCRIPTION

Mach 100 LP is a 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.

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 |2019-04-17T06:48:46+00:00December 7th, 2018|Unaccredited Newsletters|0 Comments