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White Brook Capital LLC’s 2019 Second Quarter Commentary

Chicago-based independent financial advisory firm White Brook Capital LLC has released its 2019 Second Quarter Commentary. Founded by Basil Alsikafi in 2016, the company focuses on building wealth through medium and long-term investing that doesn’t involve death, vice, and exploitation. Alsikafi is a graduate of the University of Chicago and holds an MBA from the Kellogg School of Management. Before starting White Brook Capital, he worked with big companies like JPMorgan, BBT Capital Management, and MSF Capital. As an expert in investment analysis, Alsikafi has been investing in public markets for over a decade.

In its recent commentary, White Brook Capital LLC reported a 5.46% gain during the second quarter. It compares with a 3.05% increase for the S&P Midcap 400 and a 4.30% increase for the S&P 500. A copy of the full commentary can be downloaded below.

“Portfolio Review

During the second quarter, White Brook Capital was up 5.46% vs the S&P Midcap 400 up 3.05% and the S&P 500 up 4.30%. Overall, second quarter earnings were supportive for White Brook. Portfolio earnings were strong during the quarter, despite the negative performance of Box, Inc (BOX), our largest position, that disappointed and traded down in the quarter. I remarked last quarter that expectations had been lowered and outperformance was more likely, and that was generally true in the second quarter. White Brook again didn’t trade during the quarter – except for investing new investor capital. White Brook has a multi-year investment horizon and targets high after-tax returns which means trading occurs when there are large opportunities or risk management needs, not because of boredom. I continue to be happy with the composition of the portfolio but do see new opportunities with compelling medium-term risk reward that may result in new positions soon entering the invested portfolio.

Market Overview

As I’ve told many of you, in my nearly 15 years in the public markets, I have yet to see a light turn green on CNBC or Bloomberg signifying it’s all clear mindlessly invest in the markets broadly. That light only turns on faintly, when the stock market seems to be broken, the present seems hopeless, and stocks generally seem to be just pieces of paper disjointed from the ownership share that they represent. God bless the market timers persistently looking in the tea leaves and calling for 10% moves. For those of us that do bottoms up work, there are always opportunities – when others feel bad, when they feel good, when the market is up, and when it’s down. We evaluate them on a stock by stock basis and hope to allocate capital in superior risk/reward situations that will benefit our investors. On that basis, as usual, there are an average amount of select opportunities and we’ll look to stay invested.

Outperformers

The new stocks entered during the fourth quarter of 2018, First Solar, Inc (FSLR) and Itron, Inc (ITRI), were the portfolio’s top performers. Both continue to be well positioned.

Itron was a noted underperformer last quarter. As a refresher, last quarter I noted that the company underperformed primarily due to the continued shortage of MEMS chips that delayed and increased Itron’s cost to provide older model smart meters no longer in stocked inventory. I also noted that the largest shareholder at the time, Scopia Capital, had created technical pressure by committing to reducing its stake by selling its shares on the open market. I viewed both as short-term issues.

During the second quarter, the company reported a slightly better than expected quarter and Scopia’s sales as a percentage of shares traded were significantly reduced during the second half of the quarter.”

You can download a copy of White Brook Capital LLC’s 2019 Second Quarter Commentary here:

White Brook Capital LLC’s 2019 Second Quarter Commentary

You can also see the list of our 2019 Q2 investor letters and download them on this page.

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