2020 February CAD

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-.20% MTD
0.21% YTD

“Big tech's $2trn bull run” The Economist, February 20th, 2020.
“To be clear, we don’t have our head in the sand ... We are just not getting suckered onto a bandwagon that is not within our mandate or expertise. Buying stocks at all time high PE multiples… to turn around and try to sell these same stocks at higher multiples at a future date is not a game we want to play.” Caravel Partners Letter, February 17th, 2020.

Dear Partners,

For the month of February, the Caravel Capital Fund Ltd returned -0.20%.

Before we discuss the past 45 days, we would like to kindly ask all of you to heed reason, and take the precautions demonstrated by other nations that will significantly reduce or completely avoid the possibility of harm to yourselves and to those you hold dear.  Take that 30 day break you have dreamed of all your lives and leave the world outside.  Cisco, Google and Amazon will keep you digitally connected, tell you everything you want to know, and get you whatever you need.

Glen and I would also like to acknowledge the extra efforts our staff and the Investment Banks’ equity and research teams have made to help us identify risk and offer direction at a time when knowing where NOT to go is a precious asset.  Their efforts over the past 45 days have made a difference and we are more than grateful.

As for the month of February, we are fortunate to have tempered our enthusiasm in the preceding months as the equity markets got well ahead of their fundamentals.   We spent time and money trying to focus on risk mitigation in anticipation of a revaluation of stocks, and made sure we had cash on hand.  During the month, we held various systematic hedges but unfortunately reduced most of these too early on the pullback.  There is a saying ….. Before a bull dies, it kills allot of bears.  The fund was up between 0.50% and 1.00% for the month until the last day when gold stocks became the only thing left for investors to sell.  As we have seen in times of financial stress, everything eventually becomes correlated, and gold is no exception.  Selling in gold led to selling gold equities that day and pushed the fund to a small loss.  Let us be clear we owned great gold companies, and were short gold, and poor quality gold equities. We have subsequently exited this position.

At the time of writing the market has fallen a further 19% in and has now wiped out all the gains in the major indices since June of 2017. We can report that we are down between 1% and 2% this month depending on the time of day, as the current dislocation in markets is causing bid-offer spreads to remain wide.   It is very important to understand that this is almost exclusively a result of participants leaving the markets until volatility comes down.  On a positive note, we are using these deeply discounted markets to deploy  some of the spare capital we have kept in reserve into conservative, market neutral investments. On a risk-reward basis, these are the most attractive opportunities we have seen since we opened the fund in 2016.  We are considering opening the fund up to more capital as we take advantage of these opportunities. 

Please know that your capital is next to ours and is in good hands. Contact Glen or Jeff to discuss anything at all.

We thank you for your confidence and capital.

Caravel Capital

Monthly Performance (net of all fees)

JanFebMarAprMayJunJulAugSepOctNovDec YTD

Risk vs. Return Comparisons Across Indexes

Month Return YTD Return Volatility Sharpe Sortino Beta Best Month Worst Month Annualized
S&P 500-8.23%-8.27%12.49%0.921.030.098.01%-9.03%11.39%

Growth of $1000 since inception

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