Mar Vista Investment Partners Q4 Investor Letter

Los Angeles, California-based Mar Vista Investment Partners, a minority-owned investment management firm, recently released its Q4 investor letter – you can download a copy below.

During the fourth quarter of 2017, Mar Vista’s Strategic Growth portfolio appreciated 6.5% net of fees, bringing the year’s total net return to 25.6%. The portfolio outpaced the S&P 500 Index, which gained 21.8% in 2017, but it lagged the tech-heavy Russell 1000 Growth Index, which moved up 30.2% during the last year.

“In 2017, we estimate that our stable of businesses grew intrinsic value ~12-14% which was a bit faster than anticipated given the more favorable economic environment. The corporate tax rate reduction added about 5% to fair value across our portfolio so total intrinsic value increased an estimated 17-19%. Our 26% total net return outpaced intrinsic value growth, so our margin of safety compressed from 15% in the beginning of the year to 7%,” Mar Vista said.

The firm noted that:

“Over time, the expected returns of our portfolio should reflect two components: (1) the compounding nature of our businesses and (2) the discount we are paying relative to fair value. There will be times when the sentiment pendulum swings towards optimism; portfolio returns exceed the underlying intrinsic value growth, and margins of safety contract. Conversely, fear, skepticism and lower stock prices provide opportunities for both higher expected returns and less risk.”

You can download a copy of the letter here.