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Island Investing

Riffs, rants, and the upside of investing from way off Wall Street


IIM International Portfolios: First Half of 2022

I Believe in Yesterday

I remember yesterday – before COVID-19, the Great Resignation, the Russo-Ukrainian war; before inflation surged and the S&P had the worst first half in fifty years and before ducks landed in our pool. We don’t mind if all the neighborhood critters come and clean up dropped birdseed, but why swim in our pool? We bought a plastic crocodile head, the ducks laughed when it got stuck in the skimmer. We introduced a huge crocodile float; now they’re all the best of friends. Crikey crockey!

For long investors, whether your focus the first half of 2022 was equities, bonds or crypto, you wish you could go back in time; especially if your bias was toward growth stocks. In general, value did significantly better than growth regardless of size or region. According to Morningstar, growth stocks suffered their worse losses since 2008 led in the US by declines of Amazon, Tesla and Meta. The declines in these stocks were so profound that some index providers moved them from their growth to their value benchmarks.

Internationally, China and a few other Emerging Markets were in positive territory for the first half of 2022. European countries, closer to the Ukraine war, accustomed to Russian energy and tilting toward recession, did not do well. Adding insult to injury, European currencies dropped precipitously eroding their stock prices when translated into US dollars. Frigate’s high exposure to Europe did not help performance, although it performed in-line with its benchmark. Paint and coating producer AkzoNobel and Infineon, suffering from supply uncertainties and the shut-downs in China, were among the worst performers; as was Siemens, which may have to take an impairment charge for its investment in Siemens Energy AG. Along with other Information technology companies, the share price of the Indian company Wipro fell significantly. AstraZeneca and Bayer were among the bright spots as investors appreciated their drug pipelines; and for Bayer the strength of its crop and consumer businesses. Technip, which provides offshore subsea equipment and services, was a star performer. Folio estimates Frigate’s cumulative performance as 54.86% since inception versus 45.7% estimated for its benchmark over the same time period.

Treasure Harbor, with its value bias and focus on yield, performed better than its benchmark and the broad international equity index for the first half. Still concerns over lagging consumer demand and supply interruptions led to significant detractors, which in the luxury space included LVMH and Richemont and in the tech space, ASE technology, which assembles and test semi-conductors. Deutsche Post’s share price also faltered as the company dealt with inflation in airfare, delivery and labor costs. Although June saw some pressure on oil prices, Pembina Pipeline and Shell PLC did very well for the first half, and previous detractors telecom operators Telefonica and Orange did very well. Folio estimates that Treasure Harbor’s cumulative performance since inception is 32.8%. Benchmark returns are not available for that period.

Going into the third quarter, there appears to be some abatement in oil prices and inflation in the US, but the war in Ukraine rages on, new Covid sub-variants are popping up and volatility in the equity markets continues. It is tempting to look back to what we remember as more constructive times, but they weren’t always great. My contemporaries and I have invested through soaring inflation, financial crises and, as we tend to forget, ugly wars in various regions of the world and still have benefitted from the long-term appreciation of equities. It’s better to look forward than pray for the past.

Please write or call with questions or suggestions, especially if the latter involves keeping ducks out of the pool.

– Lauretta “Retz” Ann Reeves, CFA AMWA


(i) Performance figures are estimated and unaudited. Estimated Benchmark Returns are in the column to the right of its respective Folio. Net Returns are after international taxes on dividends, management fees and trading fees, when necessary. Historical returns are available on request and at Callan and Investment Metrics.
(ii) Gross Return
(iii) Benchmark is 15% SPDR S&P Emerging Markets Dividend ETF + 85% SPDR S&P International Dividend ETF. Returns estimated based on NAV.

Disclaimer: This post nor any of the material linked to herein in any way constitutes investment advice. Historical performance data above represents performance results as reported by the portfolio identified. Performance results are for illustration purposes only. Historical results are not indicative of future performance. Positive returns are not guaranteed. Individual results will vary depending on market conditions and timing of initial investment. Investing may cause capital loss. The publication of this performance data is in no way a solicitation or offer to sell securities or investment advisory services.