Monthly Letter February 2015

Madrague is consensus. Consensus o en carries a nega ve connota on as the termi- nology implies a lack of crea vity, lack of original thinking and an inclina on to hide in the crowd. We don’t mind being consensus and we pay no a en on to what other people think about our appearance. We focus on pu ng on the best posi ons. We care about risk adjusted returns and right now we are hiding in the wisdom of the crowd segment to achieve those returns. Consensus can be correct sometimes.

So what is consensus: At the start of the year we stated that we will see a very bullish 2015 with Europe outperforming on the back of a couple of tailwinds (mainly FX and oil). This s ll holds true even though we have been surprised by the speed of the move in the equity, FX and commodity markets. Our view from the start of the year has not changed and we con nue to see upside in the European equity markets. We believe that consensus at the moment is to be long European equi es and European exposures with a few notable excep ons (read Greece and Russia). Earnings are not quite follow- ing the equity markets at the moment, but that is a lagging indicator.

We see some early signs of economic improvements in Europe when we look at PMI’s and nowcas ng GDP’s which are actually showing that Europe is growing faster than the US currently. Add that to the fact that when we recently met with BBVA they stated that they have gone from expec ng at loan growth in Spain a couple of months ago to expec ng 2% growth in 2015. Going from nega ve growth in the past few years to posi ve growth makes a big di erence in valua on for the Spanish banking sector. We believe this is the start of a trend rather than just a blip in a long downhill trend.

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