2017 Performance and 2018 Outlook


Good Morning,

Happy New Year and welcome to 2018! We hope that you all had a nice Holiday and were able to make some time to relax and refocus.

This week U.S. stocks rose to records as retail sales sparked optimism in the economy and JPMorgan Chase & Co. signaled tax cuts will bolster profits. The S&P 500 is enjoying its best 10-day start to a year since 2003. In that time period, it has rallied 4.2 percent. In the first 10 days of 2003 it gained 5.9 percent.

So far stocks have carried over the momentum from 2017  as the S&P 500 and Nasdaq have closed lower only once this year, while the Dow has fallen just twice. Heading into the end of the week treasuries pared losses that sent the two-year yield over 2 percent for the first time since 2008 as investors assessed an unexpected acceleration in core inflation that likely boosts the Federal Reserve’s case for higher rates.

The underlying pace of U.S. inflation unexpectedly accelerated in December amid increased housing costs, reinforcing the outlook for the Fed to raise interest rates several times in 2018.


Our Take

The markets are off to a blistering start in 2018 and we can’t say we are surprised. Pessimism has been high for years now and the clouds have begun to lift. Furthermore, in the year since President Donald Trump has been in office, the economy has done something it has been unable to do since 2005 — maintain 3 percent growth for three quarters in a row.

While the final numbers aren't in, economists Friday were ratcheting up growth projections to 3 percent or better for the fourth quarter, after December's strong retail sales and revisions to prior months. Perhaps a suggestion we made back in January 2017 with regards to Trump’s Braggadocio is in fact playing out: “Perhaps if businesses and consumers truly believe that Trump will “make America great again” the rhetoric will become reality as wallets open and corporate war chests are put to work. Sentiment is powerful and often precedes outcome.” 

An excerpt from our 2017 annual letter to our investors:        

“Taken together, absent a black swan event (flashpoints include the nuclear programmes of Iran and North Korea, disputes between China and its neighbors, a slowdown or crash in China, strife in the Middle East and the politics of populism threatening the EU) we view 2018 to play out similarly to 2017. With the recent enactment of the Tax Cut and Jobs Act, even more money will flow into circulation and inflation will likely not tick up in any meaningful way as excess liquidity will likely continue to stream into financial markets (think buybacks and dividends) rather than be used to expand plants or buy equipment or other goods or services. As such, it is likely that staying long high quality stocks in 2018 will remain the best game in town.


The good times are rolling and as we enter the new year we do so cautiously as it is during these periods that investors are most susceptible to folley. The classic law of nature bears re- iteration: If nothing bad is happening now, wait a bit and it will.


*To view our entire 2017 annual letter to our investors please click here.



One housekeeping issue: we will no longer be publishing this newsletter bi-weekly. It will now be published only once a month. Why?

Over the last few years we’ve learned that the frequency of writing is not always synonymous with its thoughtfulness. Most mutual funds, newsletters, and hedge funds discuss their ideas and holdings at length with their investors and followers with relative frequency whereas value investors such as Buffett, Pabrai and Spier write rarely let alone disclose their public equity portfolio positions. We have decided to follow suit, as we agree with Warren Buffett’s conclusion that investing is not a spectator sport as too frequent public discussion of current or potential investments may compromise independence of thought.

“Despite our policy of candor, we will discuss our activities in marketable securities only to the extent legally required. Good investment ideas are rare, valuable and subject to competitive appropriation just as good product or business acquisition ideas are.” -Warren Buffett

Having said that, we invite you to have a read of our 2017 annual letter to our investors linked above. We will also review our past 2017 MoneyShow investment ideas below. As well as those for 2018.


2017 MoneyShow Investment Ideas Reviewed

Peter Mantas


Huntington Ingalls Industries (NYSE:HII) : 2017 return: +29.13

-This remains a position in Logos LP.


Cemex SAB de CV (ADR) (NYSE:CX) : 2017 return: -6.6

-This was a short term peripheral opportunity we exited in 2017.


Matthew Castel


Syntel, Inc. (NASDAQ:SYNT) : 2017 return: +16.17

-This was a short term peripheral opportunity we exited in 2017.


AAON, Inc. (NASDAQ:AAON) : 2017 return: +11.75

-This remains a position in Logos LP.

2018 MoneyShow Investment Ideas


To download full report and analysis click here.


Peter Mantas


Luxoft Holding Inc. (NYSE:LXFT)

-This remains a position in Logos LP.


Del Taco Restaurants Inc. (NASDAQ:TACO)

-This is a new position in Logos LP.


Matthew Castel


Morguard Corporation (TSE:MRC)

-This is a new position in Logos LP.


Grupo Aeroportuario dl Srst SAB CV (ADR) (NYSE:ASR)

-This remains a position in Logos LP.

Logos LP December 2017 Performance


December 2017 Return: +3.89%


2017 YTD (December) Return: +33.84%


Trailing Twelve Month Return: +33.84%


CAGR since inception March 26, 2014: +21.36%


Thought of the Month


"The problem is to distinguish between being contrary to a misguided consensus and merely being stubborn.” - Robert Arnott and Robert Lovell Jr.

Articles and Ideas of Interest

  • Stock investors will benefit most from corporate tax overhaulOne of the worries about the large tax cuts for corporations is that stock-market investors will benefit more than working-class wages. There is a growing concern that much of the savings will be used for dividends or share repurchases, which would potentially boost the returns for those invested in the stock market. This is likely to accelerate U.S. inequalitybecause the wealthy are now by far the largest owners of equities. Almost half of all American households own some stock through direct purchases, mutual funds, ETFs or pensions, but the top decile controls the bulk of those assets. According to research from the New York University economist Edward Wolffthe top 10 percent of American households now own 84 percent of all stocks. That’s up from 77 percent ownership in 2001. Sadly the rest of US households may rue their binge of 2017. The latest data on the saving rate, which broke under 3 percent to 2.9 percent in November, the lowest since 2007, suggest that an encore to the ebullient buying over the holidays will not happen in the new year.


  • The end of globalisation as we know it? The period of hyperglobalisation that began in the early 1990s may be drawing to a close. Should deglobalisation come to pass, it could have far-reaching consequences for countries, corporations, and investors. Barclays puts together a nice overview of the issues in this report.


  • The next financial crisis is probably around the corner-we just don’t know from whereFinancial crises are happening more frequently, becoming almost a fixture of modern life, according to research by Deutsche Bank. While meltdowns remain difficult to see in advance, the next panic is almost certainly brewing, and it may well be provoked by the world’s major central banks. Deutsche Bank argues that crises have been increasingly frequent since the breakdown of the Bretton Woods system, which, after World War II, fixed exchange-rates and essentially linked them to the price of gold. That coordination ended in the 1970s when the US broke the dollar’s peg to the yellow metal. The link to a finite commodity helped limit the amount of debt that could be created. As strategists at the Frankfurt-based lender see it, the resulting fiat money system has encouraged rising budget deficits, higher debts, global imbalances, and more unstable markets. At the same time, banking regulations have been loosened. In the US, the industry may soon have fewer restrictions and less oversight, a mere 10 years since the last worldwide crisis.


  • Technology is destroying the most important asset in your life. Most of us come to realize at some point that money is a means, not an end. It affords opportunities, but as research has shown, there are diminishing returns to what it can do for you. In fact, the strongest link between money and well-being comes from its ability to buy you time through conveniences. Our time is limited, and the prevailing wisdom is that the more we have of it, the more opportunities there are for us to experience joy and fulfillment. But is that the whole story? Is time really what adds more to life? Quartz argues convincingly otherwise. The most important asset in your life isn’t time, but attention. The quality of the experiences in your life doesn’t depend on how many hours there are in the day, but in how the hours you have are used. You can spend 80 years of a life with as much free time as you want and still not get out of it as much as someone who only lived for 40 years but managed to appropriately direct attention to the things that mattered to them.

  • 2018: The year of the cryptocurrency craze. Every successful new technology undergoes a Cambrian Era-style explosion of growth in which we try to use it for everything. Email, search, social networking—each passed through its “this will solve all our problems!” phasebefore we figured out what its best applications and limitations were. With the Bitcoin bubble testing astronomical prices every day, cryptocurrencies and the blockchain technology that drives them are now taking their turn in this one-tech-fits-all role. What's next? Wired magazine puts together a sober overview of past present and future. For the fascinating and contrarian case that in 10 years nobody has come up with a real use for blockchain see here.


  • AI does not have enough experience to handle the next market crash. Artificial intelligence is increasingly used to make decisions in financial markets. Fund managers empower AI to make trading decisions, frequently by identifying patterns in financial data. The more data that AI has, the more it learns. And with the financial world producing data at an ever-increasing rate, AI should be getting better. But what happens if the data the AI encounters isn’t normal or represents an anomaly? Quartz investigates.


  • 30 years after Prozac arrived, we still buy that chemical imbalances cause depression. Some 2,000 years ago, the Ancient Greek scholar Hippocrates argued that all ailments, including mental illnesses such as melancholia, could be explained by imbalances in the four bodily fluids, or “humors.” Today, most of us like to think we know better: Depression—our term for melancholia—is caused by an imbalance, sure, but a chemical imbalance, in the brain.This explanation, widely cited as empirical truth, is false. It was once a tentatively-posed hypothesis in the sciences, but no evidence for it has been found, and so it has been discarded by physicians and researchers. Depression is now a global health epidemic, affecting one in four people worldwide. Great piece in Quartz suggesting that treating it as an individual medical disorder, primarily with drugs, and failing to consider the environmental factors that underlie the epidemic—such as isolation and povertybereavement, job loss,long-term unemployment, and sexual abuse—is comparable to asking citizens to live in a smog-ridden city and using medication to treat the diseases that result instead of regulating pollution.


Our best wishes for a fulfilling month,  

Logos LP

Did We Beat The Market In 2016? Outlook For 2017

Good Morning,

Welcome to 2017. We hope that you all had a restful holiday. 

U.S. equities closed higher after hitting all-time highs on Friday as the technology sector led, while investors parsed through key employment data.

The Dow also came within 0.37 points of hitting 20,000 for the first time. The S&P 500 gained 0.35 percent and posted intraday and closing record highs, with information technology advancing 1 percent.

The U.S. economy added 156,000 jobs in December, according to data from the Bureau of Labor Statistics. Economists polled by Reuters expected an increase of 178,000. The unemployment rate came in at 4.7 percent, in line with expectations. On balance this was a good report as forward momentum remains intact. 

Nevertheless, certain investors are getting nervous about all the money pouring into U.S. stocks. We would agree. 

Our Take

For our humble reflections on 2016 and our thoughts on where economies/markets are and where they may be headed in 2017, we have published the outlook half of our annual letter to our unit holders. You can find it here


“2016 proved to be a good year for the "active" investor and 2017 will unfold similarly as 3 big picture investment themes suggest continued volatility and divergence.” 

*If you would like to read a copy of our entire 18 page annual letter to our unit holders please contact us. In it you will find a detailed description of our investment approach, our activities in 2016 as well as out outlook for 2017. 


Musings Special: How Have Our Picks Performed Since Publication?


A lot of managers and analysts make stock picks yet are they held accountable? Here is a performance report card of the publicly disclosed (published) picks we made in 2016: 

Marathon Petroleum (NYSE: MPC) - Total Return since January 21st, 2016: +27.23%

IBM (NYSE: IBM- Total Return since January 11th, 2016: +32.09%

Global Brass and Copper Holdings Inc. (NYSE: BRSS- Total Return since January 13, 2016: +62.49%

Jack Henry & Associates Inc. (NASDAQ: JKHY- Total Return since January 26th, 2016: +18.64%

Credicorp (NYSE: BAP) - Total return since March 1st, 2016: +41.88%

Munro Muffler (NASDAQ: MNRO) - Total Return since March 18th 2016: -15.16%

Dorman Products (NASDAQ: DORM) - Total Return since March 18th 2016: +30.93%

Rocky Mountain Dealerships (TSE:RME) - Total Return since April 7th, 2016: +65.36%

Teledyne Technologies (NYSE: TDY- Total Return since April 22, 2017: +34.44%

Renasant Corp (NASDAQ: RNST) - Total Return since April 24th, 2016: +23.47%

Agrium (TSE: AGU) - Total Return since August 26th, 2016: +18.59%

Enghouse Systems (TSE: ENGH- Total Return since August 26th, 2016: -0.43%

Luxoft (NYSE: LXFT) - Total Return since August 26th, 2016: +19.93%

Cal-Maine Foods (NASDAQ: CALM- Total Return since September 14, 2016: -1.49%

J.M. Smucker (NYSE: SJM) - Total Return since since September 14, 2016: -3.1%


If you had bought 1 share of each of these companies upon publication and held until Jan 6, 2017 your portfolio would have returned roughly: +23.65%

This year we have again provided the MoneyShow with our top 4 picks for 2017. Unfortunately, they are scheduled to be published next week so we will provide you with the links in the next letter. The picks are: 


Peter Mantas: 

Huntington Ingalls Industries (NYSE: HII): +5.05% YTD

Cemex SAB de CV (NYSE: CX): 0% YTD


Matthew Castel:

Aaron Inc. (NASDAQ: AAON): -1.06 YTD

Syntel (NASDAQ: SYNT): +3.03% YTD


How Did Logos LP Perform In 2016?

As of December 30st 2016 on a total return basis for the year, Logos LP has returned 22.9% in CAD whereas the S&P 500 has returned 11.67% in USD and the TSX has returned 21.11% in CAD. On an unlevered cumulative basis, Logos LP’s units have appreciated 52.88%. Since inception on March 26th 2014 a Logos LP unit holder would have earned an unlevered annualized net return of 19.22% in CAD, outpacing both the S&P 500 and TSX composite indexes during that time span in their respective currencies. 

To put this performance in perspective the Barclay Hedge Fund Index which is a measure of the average return of all hedge funds (excepting Funds of Funds) in the Barclay database showed a 2016 YTD performance of 6.18%.

Data from HFI was even worse indicating that the average investor in a hedge fund in 2016 would have seen their money grow a mere 2.5%. 

Based on data from Openfolio a network with more than 70,000 members who share their investment portfolios, the average investor had a gain of roughly 5% in 2016. 

We had a pretty good year but we believe we can do much better. 


Thought of the Week


"There is nothing noble in being superior to your fellow man; true nobility is being superior to your former self.” -Ernest Hemingway

Stories and Ideas of Interest


  • Is Donald Trump the modern day Mussolini? President-elect Donald Trump’s targeting of corporations, to make them change their practices, is reminiscent of policies in Italy under dictator Benito Mussolini, according to billionaire bond manager Bill Gross. To be honest I am already growing weary of Trump’s disruptive tweets. It isn’t clear to me why the most influential man in the world would bother to tweet about things like the new star of The Apprentice yet threatening publicly traded companies via twitter is concerning. Furthermore, with no known special security protections @realDonaldTrump could be exploited for financial gain, to cause geopolitical instability or worse. It is now in fact the most powerful publication the the world as it has moved markets, conducted shadow foreign policy, and reshaped the focus of media around the world. The irony of Trump’s Twitter interventionism in US business is that Ford’s bow to Trump benefits robots, not workers


  • 10 charts for tracking whether Trump is delivering on his economic promisesQuartz has provided an at-a-glance dashboard for measuring the economy under president Trump. They have collected 10 indicators that reflect his main campaign promises, with data from the George W. Bush and Barack Obama administrations to provide context. They’ll update the data as Trump puts his plans into action. Things are tense as millennials aren't so optimistic. In fact, this generation is the only one to say they're feeling worse, financially, about 2017 than 2016. 


  • What history says has to say about the economy trump will inherit. Interestingly, research suggests factors beyond the control of any U.S. president, not their actual policies, set the course of the economy. Yet with voters, President-Elect Donald Trump will secure much of the praise or blame when it comes to the impact of his agenda over the next four years.


  • The Ultimate Authoritative Unimpeachable Top 20 Books of 2016. You could easily read so many best-books-of-the-year rankings that you’ll never get around to reading the actual books. Kira Bindrim has saved you the bother by aggregating dozens of rankings to create a master list. 


  • Bloomberg News reporters in more than 100 cities will cover the stories that matter most in 2017Here's a selection of key events for the year, plus links to related QuickTake guides. QuickTakes highlight the underpinnings of complicated subjects, providing a concise, fun-to-read entry point to current debates. 


  • The year in technology: 2016 in chartsBloomberg puts together a nice visual compilation of some of the most significant 2016 events in tech. Also don't miss IBM's annual list of 5 innovations that it thinks will change our lives within 5 years.


  • Travel in 2017. Today’s fast-changing, hyper-globalized world has no shortage of incredible travel opportunities. This year, Bloomberg has done all the legwork for you in rooting out the best, pinpointing the biggest hotel openings and cultural events of the year—along with the places you’ll want to see now, before they change forever. Looking to retire? CNBC puts together a list of the best spots worldwide to do so. 

All the best for a productive year,

Logos LP