Monthly Letter January 2014

Running with the herd can be quite nice. You can trot along at the same pace and direc on as your compe on without being too visible. Flipside is of course that it is much harder for an outside observer to spot an outstanding horse when it is right in the middle of hundreds of peers that all look the same. Like the scene in Monty Python’s Life of Brian when Brian is trying to make his followers go away and think for themselves: “Yes. We are all individuals” is their response as they stay put. At a me when it seems to us at Madrague that everybody is looking for ways to in- crease their pro le and to point out their USP (I had to look that up: Unique Selling Point) we s ll have to admit that in many issues and themes we nd ourselves being right in the middle of consensus. The thing is: we are quite OK with it. Consensus is normally not stupid. It is simply a lot of smart people (and some not so smart) hav- ing a similar view on a par cular subject. We have the luxury of picking our ghts. If we don’t believe that the market is wrong we won’t go against it. Pre y simple. If we don’t have a strong view on a stock we just won’t have a posi on. Even simpler.

China and emerging markets took the forefront of market focus in January. In short the market got worried about Chinese growth (again) and how FED tapering will a ect emerging markets with weak current accounts. These are not our core mar- kets, but they are important to us and equity investors across the globe. To form an opinion on these and other issues we spent a few days in the middle of January mee ng 14 Chinese companies plus a number of analysts and other contacts in Shanghai and Hong Kong.

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