Saga Partners’ Q1 2019 Investor Letter

Saga Partners is an investment firm, which runs a long-only, value-oriented investment portfolio for its clients in separately managed accounts. It has two Portfolio Managers – Joe Frankenfield a Chartered Financial Analyst with a BS in Finance, and  Michael Nowacki, who holds a BA in Economics and MS in Finance. Saga Partners aims to attain good returns over a longer period of time, searching for misunderstood “compounder” businesses. Recently it has released its Q1 2019 Investor Letter, a copy of which you can download below. In the letter, among other things, it has disclosed quarterly return of 33.3% net of fees, outperforming both the Russel 2000 (14.6%) and the S&P 500 (13.6%).

During the first quarter of 2019, the Saga Portfolio(“the Portfolio”) increased 33.3% net of fees. This compares to the overall increase, including dividends, for the Russell 2000 and S&P 500 Index of 14.6%and 13.6%, respectively. Since inception on January 1, 2017, the Saga Portfolio returned 55.4% net of fees, compared to the Russell 2000 Index and the S&P 500 of 16.9% and 32.4%, respectively.

When we wrote about Mr. Market’s bi-polar behavior in last year’s third quarter letter, little did we know at the time we were about to go through one of the worst quarters, then subsequently one of the best quarters since S&P 500 data became available.It’s very interesting how quickly the market can swing from “risk-off” to “risk-on” over a relatively short period when the fundamental business environment changes little.

We make no attempt to predict how the markets will behave. There is a lot of noise in everyday commentary. Our advice is to ignore it.We understand and recognize the innate desire in trying to know the future but forecasting short-term stock price movements is something we think neither we nor anyone else is able to do successfully.

Our strategy for an inevitable future economic downturn is not to predict and profit from it, but to buy companies that will survive and likely benefit,either from being relatively immune to it or gaining a further advantage at the expense of weaker competitors during hard times. Buying quality companies, when priced right and run by honest, intelligent management teams, offers the best defense against challenging macro conditions.Over time, we expect our companies to be worth considerably more money than what we originally paid for them despite where we think we may be in a business cycle.

You can download a copy of Saga Partners’ Q1 2019 Investor Letter here: