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Investor biases
A core belief of ours at Bireme Capital is that human cognitive biases drive security mispricings. This is not to say that we don’t believe in mostly-efficient markets, or that we are unaware that investor biases often cancel each other out. We simply believe that, occasionally, biased investors bunch together on a single side of the ledger, resulting in a mispriced stock. The Fundamental Value strategy returned -9.4% net of fees in Q4, a disappointing result on an absolute basis but an outperformance of 4.1% relative to SPY, the S&P 500 ETF. For the year, FV lost -1.1% after fees vs SPY’s decline of -4.6%. Since inception, the strategy has outperformed by 6.3% annually after fees, a result we work hard every day to sustain.1 
Fundamental Value had a solid quarter, returning 7.71% gross of fees, in line with the S&P 500 ETF’s return of 7.65%. This brings the portfolio’s annualized outperformance, after typical fees, to 5.4% since inception.1 
FV slightly trailed the market in Q2, returning 3.3% before fees vs 3.6% for the SPDR S&P 500 ETF (SPY). This brings the portfolio’s annualized outperformance, after typical fees, to 6.1% since inception.1 
Fundamental Value (FV) was down 1.05% in Q1, slightly trailing the -1.0% total return of the SPDR S&P 500 ETF (SPY). Since inception, FV has returned 22.7% annualized (net) vs 15.4% for SPY, an outperformance of 7.3% annually.
Fundamental Value had an exceptional quarter, up 10.7% gross vs the S&P 500 which was up 6.8%. For the year, FV finished with a 28.2% gross return vs the S&P’s 21.7%. The positive relative results were notable given the material cash balance carried throughout the year and the fact that traditional value indices underperformed in 2017, a headwind for our strategy which tends to favor such stocks.
Fundamental Value had a solid quarter, returning 4.2% on a gross basis. This return slightly trailed the S&P’s 4.4%, and brought gross returns to 35.3% and 22.5% for FV and the S&P 500 respectively since FV’s inception in June 2016.
We’re proud to report that, as of the middle of the second quarter, Bireme has been actively investing for over a year. There have been trying and frustrating times, but by and large, starting a business has been exciting and rewarding. We sincerely thank you for your trust. We couldn’t have done it without you.
Apple is currently one of the largest positions in Fundamental Value, Bireme's US equity strategy. Therefore, it was with intense interest that we read a recent short thesis on Apple posted at the Value Investor’s Club. (Note: you must create a guest account at VIC to view.
FV edged out the market in Q1, returning 6.1% before fees vs 5.9% for the SPDR S&P 500 ETF (SPY). This brings the portfolio’s annualized outperformance, after typical fees, to 10.9% since inception.1 
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