2016 Fiscal Year Report
4/14/2016
Annual Report for Fiscal Year Ending March 31, 2016
Senbet Fund Performance vs. S&P 500
Following a strong rally in Q4 of FY 2016, the Lemma Senbet Fund
finished the year with a price return of -2.68%, trailing the S&P 500
by 229 bps. Our top performing sectors were Telecommunication
Services and Consumer Staples, which combined to outperform
each of their respective S&P sectors by more than 1600 bps,
signaling a deep flight by investors into non-cyclical companies and
other defensive sectors with minimum sensitivity to commodity
prices and interest rate swings. The Fund’s worst performing sectors
were Healthcare and Industrials, as both sectors faced deteriorating
demand from investors and consumers. Lastly, despite Energy being
the Fund’s most volatile sector for the year, it still outperformed the
S&P Energy sector by more than 650 bps. The outperformance was
largely due to Cameron International’s acquisition by Schlumberger.
Sector Price Returns
Consumer Disc
Consumer Staples
Energy
Financials
Healthcare
Industrials
Information Tech
Materials
Telecom Services
Utilities
Total
Sector Allocation
Source: ThomsonOne
Top 10 Largest Holdings
Senbet
3.97%
16.77%
-11.74%
-9.26%
-15.15%
-12.74%
-1.67%
-9.40%
20.80%
10.89%
-2.68%
S&P
5.12%
8.42%
-18.27%
-6.54%
-6.77%
0.83%
6.35%
-8.06%
12.83%
11.63%
-0.39%
Relative
-1.15%
8.34%
6.53%
-2.72%
-8.38%
-13.57%
-8.01%
-1.34%
7.97%
-0.74%
-2.29%
Source: ThomsonOne
1
2
3
4
5
6
7
8
9
10
Name
Utilities Sector SPDR Fund
Nike Inc
Priceline Group Inc
Gilead Sciences Inc
Alphabet Inc
McDonald's Corp
Coca-Cola Co
Facebook Inc
Novo Nordisk A/S
Hershey Co
Sector
Allocation Fiscal
Utilities
3.36%
11.09%
Consumer Disc
3.16%
22.54%
Consumer Disc
3.08%
8.53%
Healthcare
2.94%
-5.98%
Information Tech
2.83%
37.53%
Consumer Disc
2.76%
28.98%
Consumer Staples
2.75%
15.74%
Information Tech
2.75%
6.32%
Healthcare
2.74%
1.22%
Consumer Staples
2.72%
-1.27%
Source: ThomsonOne
Top Gainers and Losers
Name
Tyson Foods Inc
Cameron International
Alphabet Inc
McDonald's Corp
Nike Inc
Economic Landscape
Fiscal
74.05%
44.94%
37.53%
28.98%
22.54%
Name
Macy's Inc
Lazard Ltd
eBay Inc
McKesson Corp
Micron Techonology
Fiscal
-43.21%
-39.20%
-30.51%
-28.29%
-27.08%
Source: ThomsonOne
Q1
Q2
Q3
Q4
GDP Growth
3.90%
2.00%
1.40%
1.50%*
10-Year Treasury 2.35%
2.06%
2.27%
1.78%
Unemployment
5.30%
5.10%
5.00%
5.00%
S&P 500
2,063.11 1,920.03 2,043.94 2,059.74
Oil
59.76
48.80
40.15
36.63
Gold
1,163.97 1,109.54 1,062.12 1,237.00
Summary and 2017 Outlook
Source: Yahoo! Finance, US Bureau of Labor Statistics
2016 has indeed proven to be a major headache not just for money managers but also for global central banks and US corporations.
Although the labor force and housing market continue to be bright spots and contributors to the resilience of the US economy, inflation has
remained the missing piece of the puzzle. Currently trading at 22x trailing earnings, the S&P looks to be at frothy levels given that earnings
estimates are expected to fall in FY16. Looking forward, we believe the US will be able to avoid a hard slowdown and conduct at least one
or two 25 bps rate hikes before the end of the year. We expect that such a move would cause the Fed to further diverge from other central
banks in terms of monetary policy, and possibly see more negative rate policies emerge from the ECB and BOJ. However, the Fund remains
cautious toward the planned rate hikes due to the uncertainty in timing and continue to believe that energy markets will have to work off a
great deal of inventory before prices can fully sustain a rebound. Overall, we continue to emphasize the importance of patient capital in this
market and are confident that this discipline will continue to allow the Fund to indentify quality companies at reasonable prices.