“When it rains it pours” is one of the more common expressions in our vernacular. Its near ubiquitous meaning implies that situations often occur in rapid succession or even all at once. In our line of work we strive for consistent, predictable net returns, by mapping out the coming months and quarters for markets (macro) and catalysts (micro) for the individual securities in our portfolios. We then allocate capital in the manner that most appropriately balances the risk & reward potential from our opportunity set.

But sometimes when it rains, it pours, and September was one of those times. Our funds posted their best month in recent times and the success we achieved to close out the third quarter can be attributed to a confluence of events impacting positions that ironically played out within the same 30 day period. So before tabling our view on market prospects for the fourth quarter of 2018 let’s review what contributed to September’s performance.  

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We like consistent performance at Forge First, steadily growing client capital over time, featuring the occasional substantial up months but avoiding big down months. Delivering on that goal explains why our funds feature the solid risk metrics and Sharpe ratios shown in the table below that covers their 6+ year track record.

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July saw a resumption of positive returns for Forge First Asset Management Inc. after an ever so brief hiatus. Given our strong focus on free cash flow and continuous bottom up analysis, we typically find that earnings season treats us reasonably well. It’s a quarterly reminder to the investing world that the companies we own have strong underlying fundamentals while those that we are short may be overvalued for any number of reasons; but again the presentation of financial statements leaves little room to hide. We were particularly encouraged by the broad based contributions to July’s performance, with the top ten made up of energy E&P longs (3) and shorts (1), technology longs (2), a REIT, a financial, an industrial and an energy marketer that seemed left for dead less than a year ago. Concerning the last stock in that list, we thought mid-year might be a decent time to lay out what has been our thesis for some time on one of our favourite names.

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The month of June was a somewhat frustrating one for us at Forge First as the portfolios struggled to gain traction amidst a market that also seems inclined to take two steps forward and two steps back. Our portfolio returns were largely held back by the kneejerk nature and short term focus of this market reacting to the “will they, won’t they?” trade war rhetoric. We truly have no opinion on whether they “will” or “won’t”, but we would prefer that the public servants get their bluster out of the way so we can invest accordingly.

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