Janlyn Partners, LP Quarterly Commentary October 21, 2015

Transcription

1 4965 U.S. Highway 42 Suite 1000 Louisville, KY (502) (502) fax Janlyn Partners, LP Quarterly Commentary October 21, 2015 The highly anticipated correction occurred in the third quarter and came in the form of a mini crash that occurred over the course of three days culminating in the NYSE rule of 48 that exacerbated the situation. Stocks like J P Morgan, Pepsico, GE and Starbucks opened down 20% to 25% on August 24 th. The rule of 48 basically says that unlike a circuit breaker that stops stock trading, Rule 48 speeds up the opening by suspending the requirement that stock prices be announced at the market open. Those prices have to be approved by stock market floor managers before trading actually begins. Without that approval, stock trading can begin sooner. Thus, if this were designed to ensure an orderly market opening it was an utter failure and it does little to instill investor confidence. We stated in our mid quarter update that we felt this was going to be a more complex bottoming process as opposed to the past V bottoms that have been experienced over the past couple of years. That certainly seems to be playing out much like what happened in 2011, as can be seen in the in the charts on the following page. The second chart depicts what happened after the bottom was formed in 2011 A significant ramp to the upside. October 21,

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3 An ongoing correction underneath the indexes has been happening for quite some time, and now the indices have played catch up. This could have easily gotten out of hand to the downside with the macro news out of China and the escalating situation out of the Middle East with Russia getting involved militarily. The commodity complex has been crushed this year coupled with the year s earlier dollar strength. That has reversed now as the FED has pushed out the raising of rates until sometime in 2016 if then. The dollar appreciation of 25% in less than eight months coupled with the excessive build up in the world oil supply has contributed to the energy complex of stocks getting crushed as well as the inordinate amount of junk bond issuance in the industry. Despite the fact that the rig count has declined 50% over the past year U.S. oil production was still up. That is now starting to abate. The energy stocks are trying their best to bottom and we are starting to get involved on a trading basis currently and looking to get more involved with a little longer time horizon as the quarter unfolds. The Biotech Index, which has been a stellar performer for several years, finally succumbed during the quarter as that index lost over 25% from the top in late July. See chart on the following page. October 21,

4 This was the worst quarter for the indices in four years and could have been worse if not for a nearly 2% rally on the final day of the period. Our portfolio lost 6.16% from the long side during the quarter and made 3.05% from the short side which was profitable all three months of the period. The short side of the ledger was predominantly driven by the biotech and semiconductor spaces. Under Armor was our best long as we played that name through earnings via calls. Ironically, Humana was one of our worst longs and it was a takeover by Aetna. Go figure. All in all, we kept our exposure really small during the period as it was very difficult to make any sizable bets as the volatility was just too great. Our average exposure during the quarter was 28.6% long and 13.7% short. We are entering the seasonal period when things start to improve and treasury yields have settled back above 2%. A recession has never been seen without a flat to inverted yield curve and sentiment is abysmal. We are looking to get much more bullish here. Current holdings include Apple, Intel, Goldman Sachs, Paypal Freeport McMoran and J.C. Penney. Best Regards, B. Anthony Weber Managing Partner October 21,

5 Past performance does not provide any guarantee of future performance, and one should not rely on the historical performance as an indication of future performance. Investment return and principal value of an investment will fluctuate so that the value of the account may be worth more or less than the original invested cost. The performance has been compared to the following benchmarks (all shown with dividends reinvested): HFRX Equity Hedge Index - Equity Hedge strategies maintain positions both long and short in primarily equity and equity derivative securities. S&P 500 Index Unmanaged index of 500 widely traded industrial, transportation, financial and public utility stocks. Russell market capitalization weighted equity index maintained by the Russell Investment Group that seeks to be a benchmark of the entire U.S. stock market. More specifically, this index encompasses the 3,000 largest U.S.-traded stocks, in which the underlying companies are all incorporated in the U.S. Contents are provided for general information purposes only and do not constitute an offer to sell or a solicitation of an offer of the services of Janlyn Capital, LLC ( Janlyn ). The Contents of this presentation are neither sufficient for, nor intended by Janlyn to be used in connection with, any decision relating to the purchase or sale of any existing or future Securities. Janlyn does not intend to provide financial, investment, tax, legal, or accounting advice. Investors considering the purchase or sale of any Securities should consult with their own independent professional advisors. Janlyn may make changes to or update this presentation at any time without notice. In no event shall Janlyn or its directors, officers, employees, servants, agents or affiliates be liable for any claim whatsoever including reasonable legal fees arising from the use of this section and the Contents contained therein due to, but not limited to, failure to keep the contents up to date or for errors or omissions contained herein. It is not intended that this presentation contain forward-looking statements. If statements contained anywhere in the Contents, including statements regarding events and financial trends that may affect future operating results, financial position and cash flows, may be found to constitute forward-looking statements within the meaning of the United States federal or other securities laws, all such statements are based on assumptions and estimates by Janlyn and are subject to risks and uncertainties. You can identify these forward-looking statements by the use of words like "strategy," "expects," "plans," "believes," "will," "estimates," "intends," "projects," "goals, "targets" and other words of similar meaning. You can also identify them by the fact that they do not relate strictly to historical or current facts. October 21,