Happy New Year – I hope you all had wonderful holidays.
Friday the 29th of December we ended the fiscal year of 2017 for Manivest – still in its incubation mode under WARP Consulting, but strictly following the Manivest strategy since July 2016. It has been a promising year for the strategy. It has proven, to be very effective in identifying potential investment candidates, by automating the global screening of stock markets using the Manivest criteria and algorithms.
We ended the year with a gross profit of 71,58% and a calculated net profit of 57,26%. We actually reached a significant higher return end of November, but some of our investments in Western Digital and Micron experienced a drawback in December due to some concerns of future growth prospects. Furthermore, we experienced how much power the Wall Street bankers and analysts have on the stock market. An overall positive report from Morgan Stanley, raised some concerns about NAND pricing (Flash memory/storage) – one of the products Micron is producing. In the same report, they praise Micron as one of the leaders in the market, and that it was unlikely to have an effect on the earnings outlook. They also raised their price target from 39 USD to 55 USD a share – a whopping 41% price increase! Nonetheless the market reacted by sending most companies in this industry down by about 20% in November and December? Sometimes you just shake your head when it comes to the irrational logic in the Stock market and the psychology associated with trading.
Micron released their Q1 2018 report on December 19th – they beat analyst estimates by more than 10% on earnings – still the stock was traded lower in the days following the release. The outlook for Micron remains strong for 2018, and the stock is now trading at a P/E around 6 !!!
I bring a little industry knowledge to the game in these stocks. My former job was as COO for Denmarks largest Datacenter operator. A very big growth driver for Micron and Western Digital is the growth in Datacenter operations – both in terms of servers (computing power) and storage. The organic growth rates in terms of servers and storage is 25-30% annually – to this you have to add, that most equipment in Datacenters is retired and changed after 36-60 months – adding another 20-33% to the yearly “growth/renewal” factor. This means, that most Datacenter and cloud operators must acquire 45-60% new and additional systems per year! When I left the company, there was no sign of this trend slowing down. New trends as Big Data and Internet of Things are additional drivers. These numbers are in line with Micron’s and general market expectations for DRAM and NAND in 2018. We are continuous bullish on both Micron and Western Digital in 2018, but will monitor market demand and growth rates closely.
2017 was also the year we finished our online investor portal, which integrates directly with our broker system at SAXO Bank. This gives our investors a unique opportunity to follow their investment in Manivest very closely. The system provides our investors daily updated performance measurements, news and insights on all our positions. As it connects to our back-end system, investors have the possibility to do their own research on stocks using the Manivest system. We believe our functionality and transparency is second-to-none within this industry, and hope you do to.
We are optimistic entering 2018. We believe, that the companies we are focusing on, should be able to give us a reasonable return this year. We strive to deliver 100% return over a 5 year period, and this year we reset the clock, as we now enter our true fund structure.
We welcome all our new investors, and look forward working with and for you. Please don’t hesitate to contact us, if you have any questions on our investments, or just want a general chat on the markets and our ideas. We truly welcome and enjoy having a close relationship with our fellow investors.
I wish you and your family a Happy and Prosperous New Year
Peter Kroul, Manivest Fund Manager
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