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Fwd: 3Q Letter
PRI: NORMAL
FROM:
E
eschwerin@rosemontseneca.com
DATE:
2014-10-08 18:33:55
MSG_ID:
<B4C9445A-102B-4643-B11C-26464B759A15@rosemontseneca.com>
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TO:
H
Hunter Biden
<hbiden@rosemontseneca.com>
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Eric D. Schwerin Rosemont Seneca Partners, LLC 1010 Wisconsin Ave., NW Suite 705 Washington, DC 20007 (202) 333-1880 eschwerin@rosemontseneca.com P Consider the environment before printing this email. Begin forwarded message: > From: Dan McHale <dmchale@rspinv.com> > Subject: Fwd: 3Q Letter > Date: October 8, 2014 at 1:35:17 PM EDT > To: Eric Schwerin <eschwerin@rspinv.com>, Arlene Busch <abusch@rspinv.com>, Joan Peugh <jpeugh@rspinv.com> > > This is Madera’s 3Q letter on the “paper portfolio” that they’ve been running during the pre-launch period. Anyone who has met them has been updated throughout on their progress. His numbers and themes are very very good. > > > Daniel P. McHale > Managing Director > RSP Investments, LLC > New York / Washington D.C. > Direct: (212) 376-4633 > Mobile: (917) 887-6699 > dmchale@rspinv.com > P Consider the environment before printing this email. > > NOTICE: RSP Investments, LLC is not acting as a municipal advisor and the opinions or views contained herein are not intended to be, and do not constitute, advice within the meaning of Section 975 of the Dodd-Frank Wall Street Reform and Consumer Protection Act. This e-mail message, and any attachments, is not an offer, or solicitation of an offer, to buy or sell any security or other product. The information provided is subject to change without notice. This e-mail may contain privileged or confidential information or may otherwise be protected by other legal rules. Mistransmission is not intended to waive confidentiality or privilege. If you have received this communication in error, please destroy all electronic and paper copies and notify the sender immediately. RSP Investments, LLC reserves the right, to the extent permitted under applicable law, to monitor, review and retain all electronic communications traveling through its networks and systems. By messaging with RSP Investments, LLC, you consent to the foregoing. E-mail transmissions cannot be guaranteed to be secure, timely or error-free. > > Begin forwarded message: > >> From: Kris Drankiewicz <kris@maderatp.com> >> Subject: 3Q Letter >> Date: October 8, 2014 at 11:21:50 AM EDT >> To: Daniel McHale <dmchale@rspinv.com> >> >> Here is the draft of our 3Q letter. I put in a line about the launch--at the beginning and the end. Take a look and let me know if you advise that we tweak. >> >> Thanks >> >> Madera Technology Partners >> >> >> >> October 7, 2014 >> >> >> Dear Partner: >> >> >> Thank you for your interest and support. It is an exciting time as we are approaching the launch of the fund and hope to have you as a partner and investor. >> >> Our strategy performed as expected in 3Q, with the portfolio gaining 2.8%, bringing the YTD total return of our pre-launch paper portfolio to 50.2%. We anticipated increased market volatility after many names had a big run in June ahead of what we expected to be choppy fundamentals. After modeling a heightened level of risk, we proactively reduced both our gross and net exposure. As investors have exhibited a high degree of frustration and consternation, we have been able to use near-term market volatility to our advantage and size positions accordingly with attractive risk-rewards in our long-term multi-year theses. >> >> >> January >> >> February >> >> March >> >> April >> >> May >> >> June >> >> July >> >> August >> >> September >> >> YTD >> >> +13.2% >> >> +13.0% >> >> +4.9% >> >> +5.8% >> >> +4.2% >> >> +6.2% >> >> -1.0% >> >> +4.4% >> >> -0.6% >> >> +50.2% >> >> >> The Portfolio: The largest contributors to the portfolio’s 3Q performance included many of our core positions across innovation, secular disruption, product cycle, and mobile data themes. >> >> >> Company >> >> 3Q Stock Change >> >> Company >> >> 3Q Stock Change >> >> Facebook Inc. >> >> +17% >> >> Splunk Inc. >> >> +0% >> >> LinkedIn Corporation >> >> +21% >> >> Apple Inc. >> >> +8% >> >> Guidewire Software, Inc. >> >> +9% >> >> Crown Castle Intl. Corp. >> >> +9% >> >> SAP >> >> -6% >> >> Akamai Tech., Inc. >> >> -2% >> >> Microsoft >> >> +11% >> >> Avago, Tech Ltd. >> >> +21% >> >> >> Long Themes: Our core innovation positions continue to exhibit extremely strong fundamentals as they benefit from secular tailwinds. We have embedded ourselves within the advertising ecosystem this summer and are excited to see Omnicom move an additional 25% of their TV ad dollars to online video. For context, Omnicom oversees $55B in spend; FB posted $7.9B in sales last year. This is one of the core fundamental drivers to our thesis on FB as a platform—important as there are few platforms in tech and these often approach permanence. DATA and SPLK continue to advance data analysis and visualization innovation, compounding RIO for customers and supplanting competition. Data is the most powerful and valuable asset in tech. GWRE, an undiscovered gem, continues to grow their innovative platform that is revolutionizing the insurance industry. The seismic disruption that is occurring continues to go underappreciated by investors, providing compelling risk-rewards for our long-term theses. >> >> The secular disruption in the semiconductor/memory space continues to evolve. We expect increased demand for tools (AMAT, KLAC, LRCX) and improved cash returns to benefit our longs. >> >> >> >> Short Themes: Our structural short thesis in the LED space has exhibited one of the more dramatic moves, with the position falling 57%. While we anticipate further downside, the risk-reward has shifted and we’ve largely covered our position. >> >> Our secular theses in the ERP and Consulting spaces continue to add performance. Investors have utilized this space as a place to hide amidst volatility elsewhere, only to be surprised as the companies miss earnings. While many investors have fallen prey to clever marketing about “innovative” products, we have leveraged our technology backgrounds to discern reality from hype. The headwinds here are structural and are likely to have a protracted impact. >> >> Disruption is also afflicting the auto/industrial/commodity handset spaces. The confluence of moderating demand trends, overbuilt inventory, peak margins, price compression, high expectations, and peak valuations presents a compelling construct for our short positions. >> >> We continue to gain conviction in our long-term negative thesis on legacy networking, which is fueled in part by the advent of fully-baked SDN solutions. The legacy networking space is the last bastion of high-margin hardware. Every other area of technology has seen margin compression as commodization takes hold. This is a multi-year theme that will take time to play out, though misplaced high-expectations, 4-year high valuations, and early cracks in the models highlighting price and margin compression provide near-term catalyst for the short positions. >> >> >> >> >> Thank you for your interest and support. As we begin to offer our Founder’s Share class to benefit early investors we hope to have you as our partner. >> >> >> >> Kris Drankiewicz >> >> Madera Technology Partners, LP >> >> >> Kris@maderatp.com >> >> +1-212-229-0859 >> >> >> >> >> >> >> >> Madera Technology Partners, LP >> 379 West Broadway >> New York, NY 10012 >> Direct: +1-212-229-0859 >> Mobile: +1-646-820-6295 >> Kris@maderatp.com >
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