Hinde Group Model Portfolio

Managed by Hinde Group

3.1% Last 30 days 4.1% Last 90 days 35.9% Last 365 days 2.15 Sharpe Ratio -11.1% Max Drawdown

Hinde Group Model Portfolio

Managed by Hinde Group

3.1% Last 30 days 4.1% Last 90 days 35.9% Last 365 days 2.15 Sharpe Ratio -11.07 Max Drawdown
Risk score
Strategy Stocks
AUM fee 1.5%
Requirements
• Investment minimum: $55,000
• Margin account
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Hinde Group invests in publicly-traded securities using a value-oriented approach. The firm’s primary focus is on U.S.-listed equities. Through rigorous primary research, Hinde Group identifies securities that are materially mispriced as a result of being misunderstood, underappreciated or out-of-favor. Hinde Group invests with a 5-year time horizon and aims to achieve returns above passive equity alternatives while minimizing the probability and severity of return outcomes below the returns of treasury bills.

Research

Fundamental analysis and primary research guide Hinde Group’s investments. Hinde Group’s research process has four steps: screening, evaluation, due diligence and investment and monitoring.

 

The screening step starts with the universe of all publicly-traded securities globally, although particular focus is placed on U.S.-listed equities. Over 15 criteria are used to identify securities that are more likely than average to be mispriced. The criteria include both qualitative attributes, such as companies exiting bankruptcy with publicly-traded equity, and quantitative metrics, such as securities trading near 52-week lows. Hinde Group runs the screens at intervals ranging from weekly to quarterly depending on the nature of the associated criteria. Securities that meet the criteria of one or more screens are added to an evaluation pipeline and prioritized by the screen’s signal strength and initial triage.

 

The purpose of the evaluation step is to further focus Hinde Group’s research efforts in an efficient manner. Evaluating a security is meant to take less than two hours, and involves reviewing basic information about a company, such as its annual report and most recent investor presentation, and performing preliminary financial statement and valuation analyses. The goal is to determine whether the opportunity offered by a given security seems compelling enough to justify putting it through Hinde Group’s extensive due diligence process.

 

Securities that make it through the evaluation process are put through Hinde Group’s due diligence process. Hinde Group’s due diligence process starts with an extensive review of publicly available information, a variety of in-depth analyses and one or more calls with the management of a subject company, but the essence of the due diligence process is proprietary, primary research. Most often this takes the form of detailed discussions with the subject company’s former executives, competitors, suppliers, customers and other related parties. This proprietary primary research typically results in Hinde Group gaining a superior understanding of the subject company relative to most other market participants. Ideally, this superior understanding confirms or reveals one or more things about the subject company that the market misunderstands or does not appreciate and that account for the security’s mispricing. Hinde Group’s due diligence process generally exceeds two weeks.

 

Securities that meet Hinde Group’s investment criteria after being put through the due diligence process are considered for investment. An internal investment memorandum is created to formalize the thesis and create an audit trail. The size of the position is determined by several factors, including the i) estimated risk-adjusted return, ii) estimated total risk, iii) estimated correlation with the rest of the portfolio, iv) nature of any catalysts for a correction of the mispricing, v) hedging opportunities and vi) results of Hinde Group’s market assessment analysis. Once a position is in the portfolio, it is subject to ongoing due diligence.

 

 

Approach

Hinde Group aims to exploit inefficiencies in financial markets through a combination of unique attributes. First, we have a rigorous and proprietary due diligence process that consistently yields a superior understanding of the securities and companies that we analyze. Second, we believe we can recognize the difference between noise-driven and information-driven price volatility, and are more willing to bear the former than most public market investors. Third, we are willing to invest with a much longer time horizon than most market participants. Finally, we are fiercely open-minded, evidence-based and independent in our analyses, something that we think insulates us from behavioral biases endemic to financial markets. Our primary focus is on U.S.-listed equities, although we will opportunistically consider any publicly-traded security.

 

Our investments fall into two categories, Compounders and Special Situations. Compounders are generally equity securities issued by companies with talented and honest management, owner-oriented corporate governance, an entrenched competitive position, stable-to-attractive industry dynamics, and opportunities to reinvest capital at high rates of return. Special Situations are securities trading at the time of purchase at a meaningful discount to our estimate of their respective intrinsic values and for which one or more specific catalysts exist that may cause the security's price to appreciate towards intrinsic value.

 

Although Hinde Group’s individual investments are based on security-specific theses, Hinde Group also pays close attention to economic and financial market conditions through a proprietary market assessment analysis. Hinde Group’s market assessment analysis informs the firm’s portfolio and risk management.

 

Allocation discipline

Hinde Group’s investable universe includes all publicly-traded securities, but the firm’s primary focus is on U.S.-listed equities.

 

For securities that meet the Compounder criteria, Hinde Group requires a compound annual expected return of at least 15% over a 5-year period. That hurdle is adjusted higher for securities that exceed a certain risk threshold. Haircuts and limits are applied to earnings, cash flow and capitalization rate assumptions to ensure conservatism. Hinde Group expects to hold each Compounder for at least three years.

 

For Special Situations, Hinde Group requires a purchase price that is two-thirds or less of a conservative appraisal of intrinsic value. A Special Situation investment must also have one or more catalysts for resolving the mispricing that are reasonably expected to occur within two years. The holding period of each Special Situation will be determined by the associated catalysts, and will generally be less than two years.

 

Typical initial position sizes for long positions range from 5% to 15% of the portfolio. The size of a position is determined by several factors, including the i) estimated risk-adjusted return, ii) estimated total risk, iii) estimated correlation with the rest of the portfolio, iv) nature of any catalysts for a correction of the mispricing, v) hedging opportunities and vi) results of Hinde Group’s market assessment analysis. The portfolio will generally have between 8 and 12 long positions.

 

The portfolio may include short equity positions. If a short equity position directly hedges a long position, its size could be as large as that of the associated long position. If the short equity position is a stand-alone special situation investment, it will generally represent 2.5% or less of the portfolio’s value.

 

At most times, the portfolio will be primarily invested in equities with substantial net long exposure. The portfolio will hold cash as a residual to the extent Hinde Group cannot identify a sufficient number of investments to put all of its capital to work. Under certain circumstances, the portfolio’s asset allocation and net exposure could deviate materially from the composition that Hinde Group expects at most times (substantially net long equities). For example, the portfolio could conceivably i) have the majority of its value in cash and cash equivalents, ii) have the majority of its value in fixed income investments, or iii) have net short equity exposure, among other possibilities. The exposure of the portfolio is determined both by the individual opportunities Hinde Group is able to identify as well as the results of Hinde Group’s market assessment analysis.

 

Hinde Group aims to manage the portfolio to a level of risk that minimizes the probability and severity of possible return outcomes over a 5-year period that are below the corresponding return on treasury bills.

 

Sell discipline

Hinde Group uses different approaches for selling Compounders and Special Situations.

 

Compounders are securities issued by businesses that Hinde Group expects to thrive over the long-term. Hinde Group’s bias is to hold those securities in order to participate in the returns the underlying businesses generate and realize the benefit of deferring capital gains taxes over a long period of time. In light of that, there are three reasons that Hinde Group would sell a Compounder: i) if the Compounder’s underlying business no longer meets Hinde Group’s qualitative or quantitative criteria for a Compounder (e.g. the company’s competitive position deteriorated), ii) if Hinde Group identifies a more compelling investment opportunity and the Compounder is the best source of capital to fund the new investment, iii) if the Compounder appreciates to a point where the expected risk-adjusted returns is well below market levels. Hinde Group expects that it will most often sell Compounders because they are crowded out of the portfolio by better alternatives over time.

 

Special Situations are catalyst-oriented investments in which Hinde Group aims to benefit from the correction of a mispricing in the market, not from the underlying business’s long-term performance. Hinde Group is only willing to hold Special Situations to the extent that i) the security trades for notably less than its intrinsic value and ii) there are one or more clear catalysts within the next two years for correcting the mispricing. As a result, Hinde Group will sell a Special Situation if: i) the Special Situation appreciates substantially toward its intrinsic value, ii) the originally anticipated catalysts pass or fail to occur, or iii) the estimate intrinsic value of the Special Situation materially deteriorates.

 

Although Hinde Group does not use rigid stop-loss rules, it has other measures in place to protect against large losses that could develop from so-called “thesis creep.”

 

Exceptions

The opportunity set of mispriced securities in public markets inevitably varies over time. Hinde Group’s strategy is to opportunistically exploit the inefficiencies it is able to identify, so the composition of the portfolio will inherently vary along with the opportunity set that is available. Hinde Group expects its portfolio to correspond to the aforementioned guidelines at most times.

All performance information on this page is based on the performance of the Portfolio Manager’s account. Client performance may differ. This information was calculated on May 18, 2018.

Daily returns
Performance
S&P 500 ETF
Manager (net of fees )
Last 30 days 3.1% 0.3%
Last 90 days 4.1% -0.3%
Last 365 Days 35.9% 16.8%
Since inception (Annualized) 20.7% 12.2%
2018 (YTD) 8.4% 2.1%
2017 35.6% 21.7%
2016 12.9% 12.0%
Risk metrics (last 365 days)
S&P 500 ETF
Manager (net of fees )
Volatility 15.8% 12.2%
Sharpe Ratio 2.15 1.22
Sortino Ratio 2.44 1.27
Maximum Drawdown -11.1% -10.1%
Value-at-risk (95%, 1 week) -3.7% -2.8%
Additional metrics (last 365 days)
vs. S&P 500 ETF
Information Ratio 2.3%
Alpha 13.98
Beta 1.11
R-Squared 0.7%
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About Hinde Group

Hinde Group was founded in 2015 by Marc Werres, an investment professional with over 14 years of experience and an outstanding long-term track record. Prior to founding Hinde Group, Marc co-founded and led another value-oriented investment management firm, Werres, Tseng & Co., LLC, for approximately 5 years. Before that, Marc was an analyst responsible for investments in the consumer/retail sector at Vardon Capital Management, LLC, a long/short equity hedge fund manager that had over $700 million under management at the time. He started his career as an analyst at Houlihan Lokey Howard & Zukin, an investment bank, where he focused on M&A and financial restructuring advisory engagements. Marc graduated with honors from NYU’s Leonard N. Stern School of Business in 2002 with a B.S. in Finance and Accounting. The firm’s name is inspired by the Golden Hinde, the galleon Sir Francis Drake used to circumnavigate the globe between 1577 and 1580. Sir Francis Drake built his legacy on a remarkable ability to see opportunity where others did not, a trait that we hope similarly sets Hinde Group apart.

Important Information

  1. Past performance is no guarantee of future results, and all investments, including those in this portfolio, involve the risk of loss, including loss of principal and a reduction in earnings.  
  2. All performance information on this page is based on the performance of the Portfolio Manager’s account, using the manager’s own funds. Portfolio Manager’s pre-IB Asset Management performance information may include performance of non-IB Asset Management client accounts. Performance of the Portfolio Manager's account is calculated by IB Asset Management on a daily time-weighted basis, including cash, dividends and earnings distributions and reflects the deduction of broker commissions. Manager returns include trades and positions that fail IB Asset Management's trading rules, as a result, actual client returns will differ. IB Asset Management advisory fees are simulated and applied retroactively to present the portfolio return "net-of-fees".
  3. None of the performance information displayed on this page is based on the actual performance of any IB Asset Management client account investing in this portfolio. The performance in an IB Asset Management client account invested in this portfolio may differ (i.e., be lower or higher) from the Portfolio Manager’s account performance based on any trading restrictions imposed by the client (resulting in different account holdings), time of initial investment, amount of investment, frequency and size of cash flows in and out of the client account, applicable brokerage commissions, and different corporate actions. Clients investing in this portfolio may view the actual performance of their investment in this portfolio by logging into their IB Asset Management account and reviewing their customized dashboard.
  4. All graph data is as of the end of day for the referenced period, unless otherwise specified. The investment minimum is the minimum investment required to follow a particular portfolio. The minimum amount is determined by IB Asset Management, based on the characteristics of the underlying portfolio. It should not be considered as specific investment advice for your investment situation.
  5. The performance charts are provided for informational purposes only, and should not be used as the basis for making an investment decision. We rely on mathematical formulas, computer programs, and pricing information from third-party vendors to provide these returns. Neither IB Asset Management nor any of its data or content providers shall be liable for any errors in this information or any actions taken by you in reliance upon this information.
  6. Benchmark returns displayed have been calculated by IB Asset Management using daily adjusted close prices and include dividend income. More information here. For certain portfolios IB Asset Management uses an index as a benchmark, while for others it uses an investable exchange traded fund (ETF) as a benchmark. Index returns do not reflect the deduction of any management fees, transaction costs or expenses. Individuals cannot invest directly in an index. Investable ETF returns reflect the deduction of (i.e., are net of) management fees, transaction costs and expenses.
  7. All Portfolio Manager information including personal data, profiles, strategies, monthly investment reports, and historical results outside of IB Asset Management has been provided by the Portfolio Manager. IB Asset Management makes no representation or warranty of its accuracy, completeness or relevance and it does not represent the opinions of IB Asset Management. Transaction history of Portfolio Managers is available upon request. Portfolio classifications are provided by IB Asset Management, and are intended to serve as a general guide.
  8. Not all transactions listed will appear in accounts due to IB Asset Management's trading rules and individual client constraints. Eligibility of these securities is monitored periodically, and may change over time. Actual client investment holdings may vary.
  9. This portfolio was launched on IB Asset Management on April 11, 2018. Returns history prior to launch is derived from account position valuation and cash flow data at Interactive Brokers. IB Asset Management has not reviewed this performance data but has received manager certification that it adheres to the current strategy.
  10. The Portfolio Manager could use short selling to manage this portfolio. Short selling is more complex than simply owning securities, involves a high degree of risk, is highly speculative, and is not suitable for all investors. The risk of loss associated with short selling is virtually unlimited. Short selling may also involve additional expenses and risks, including hard-to-borrow stock charges and buy-in risk. You should only select a portfolio using short selling if you are comfortable with the level of risk involved in short selling.
  11. The Portfolio Manager could use borrowed funds or leverage to fund investments in this portfolio. Leverage indicates the level of margin utilized and is calculated by dividing gross exposure by portfolio net liquidation value. Leverage involves a high degree of risk, is highly speculative, and is not suitable for all investors. Leverage increases both the amount you may lose and the amount you may make in a portfolio, leading to higher returns in the case of favorable market movements but also larger losses under adverse market conditions. You may also incur additional expenses associated with borrowing funds. You should only select a portfolio using leverage if you are comfortable with the level of risk involved in using leverage.