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6 November, 2018
The markets were calm the past quarter, both for A&F Investments and for the markets in Europe. A well-known saying is “Sell in May, come back in September”. Even though it is has been considered a myth for recent years, it seems to be the case this year. At least in Europe. The US experienced a bull market. A&F Investments closed the quarter with a small, but positive, result, beating the European markets. The American indices all rose with more than 7%, and left us far behind. The Chinese Hang Seng index fell with 7%. It seems that investors have appointed the US as winner in the trade war.
We only executed a few transactions in the last quarter. We sold our KBC position, this Belgian bank underperformed the last years and has a high percentage of bad loans, which led to us cutting this position. The EU interest rate also stayed behind the US interest rate, which is negative for KBC. We also sold half our share of Ahold. Ahold is a Dutch supermarket company. Over the last years, we increased our position. We now considered it too big and took profit on half of the position. Ahold’s strategy also didn’t appeal to us anymore, with the majority of their revenue in the US, where they don’t have a distinctive position.
“The year proves promising for A&F Investments, I am positive we will learn a lot and extend our network.”
We also sold our position in commodities. This position was taken as a hedge against a market downturn and a rise in inflation. The effect on commodity prices turned out lower than we wanted. As we had a chance to take some profit, we sold the position. As a consequence, we went looking for other instruments to assume a hedge against unfavorable market conditions. We found what we were looking for in the company Flow Traders. The company Flow Traders has a higher revenue when trading volumes are large, which often coincides with market downturns. Because we wanted a significant hedge with a small position, we bought a call option. The option gives us the right to buy shares of Flow Traders at 27 euro’s in December. This strategy immediately showed a return, as the markets had a correction in the first weeks of October. Our position roughly doubled (Flow Traders is trading at 29.14 at the moment of writing).
Furthermore, we strengthened our ties with the board of Asset | Accounting & Finance and discussed our plans for the year. Also, we promoted our committee during the first weeks of the semester, to obtain new members. This payed off, as we welcome 13 new members for the new quarter. The entire group is now 28 members large. Lastly, we are proud to announce that we extended our partnership with IBS Capital Allies and First Dutch and we signed a new partner for the coming year: Blacktrace. We look forward to hear their opinions and learn from their expertise. The year proves promising for A&F Investments, I am positive we will learn a lot and extend our network.
