Lockstep’s Monthly Update and 1 Year Anniversary

Our Funds’ Performance for January 2023

Premium Fund
The Premium Fund was up +9.6% for January 2023 and is up +2.5% since launching in February 2022.

The Value Fund
The Value Fund was up +10.5% for January 2023 but is down -3.1% since launching in February 2022.


Performance vs the Market

Today marks the 1st anniversary of our funds, which launched on the 1st of February 2022.

Although the Premium Fund is only up +2.5% since inception, and the Value Fund is down -3.1%, we are incredibly proud of our performance compared to the S&P 500 and the Nasdaq Composite, both of which were down -9.7% and -18.7%, respectively, over the same period. It was a difficult 12 months in the market. Therefore, posting our performance is worth a pat on the back (even if from ourselves!)
We choose to believe that our outperformance is because we offer something different. By investing for ourselves only, we can invest in areas that large institutions cannot, i.e. smaller, lesser-known companies that, although flying below the radar of the market, are high-quality business-run but competent management teams. Our investing experience allows us to find these profitable businesses with a proven track record and, more often than not, a catalyst that will unlock value over time.


The Year Ahead

2023 is off to a flying start, with the S&P 500 and Nasdaq Composite up +6.2% and 10.7%, respectively, for January. Several factors drove the strong market performance;

  • China Reopening: Over the past several weeks China has eased lockdown restrictions and reopened its economy, helping boost global growth expectations.
  • US interest rate expectations: The Federal Reserve, which is meeting today, is expected to lower the rate of interest rate increases as inflation continues to cool in the US.
  • Market upgrading stock: We are starting to see analysts’ upgrading their stock rating, suggesting they believe the worst is behind us.

However, even though 2023 has started well, we have no idea what the rest of the year will bring. There are still significant headwinds, such as geopolitical tensions , stubborn inflation around the world, and lower consumption post-pandemic. Some of these headwinds are easing, however.

From a purely bottom-up perspective, even though valuations are lower, we still believe a significant amount of overvalued companies are propping up the market. Some of these businesses have never been profitable, are valued at crazy multiples of revenue or have too much debt on their balance sheets in a rising interest rate environment. At some point, these valuations have to correct.


Closing Thoughts

Despite the macro headwinds and the high valuations of some companies, there are high-quality listed businesses valued very cheaply, with significant tailwinds. We like to believe our portfolio comprises such companies and are, therefore, very excited about the upside potential of both funds.
We look forward to the next 12 months and will try our best to outperform the market again.

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