Lockstep’s Monthly Update – March 2023


Our Funds’ Performance for March 2023

Premium Fund

The Premium Fund was down -13.0% for March 2023 and is down -8.3% Year-to-Date.

The Value Fund

The Value Fund was down -4.6% for March 2023 and is up +2.4% Year-to-Date.


Market Performance

Despite all the craziness during the month, the S&P 500 and Nasdaq Composite finished the month up 3.5% and 6.7%, respectively.

The S&P 500’s largest constituents, Apple (7.1% of the index), Microsoft (6.1%), Amazon (2.6%), NVIDIA (1.9%) and Alphabet (1.8%) were all up well over 10% in March, while the Nasdaq Composite’s top holdings include all of the above plus META and Tesla, both up for the month.

Banks collapse

While it might seem like plain sailing in the markets, given the strong index performance, it was anything but. Just days after the Chairman of the Federal Reserve (Fed) stated in congress that the Fed would do what it takes to combat inflation, Silicon Valley Bank  (SVB) collapsed, followed shortly by Silvergate Bank and Signature Bank. Even Europe felt the pain as Credit Suisse had to be bailed out by the Swiss government and UBS.

(For more information on what caused all these banking issues, we have published a guide on the collapse of SVB.)

Fed’s next move

The Fed is now stuck between a rock and a hard place. Inflation, although coming down, remains high, and the Fed has been increasing interest rates to drive it down. YET these rapid rate increases were the catalyst for the collapse of SVB and its peers. If the Fed continues raising rates, it could lead to more cracks in the financial system. Our view is that the Fed has no choice but to pause rate hikes and even pivot.


Drivers of Performance

Negative Performers

Both the Premium and Value Funds had a terrible month on paper. The worst performers for both funds were SRG and LEE. The Premium Fund is more concentrated than the Value Fund, meaning its more prominent exposure to SRG and LEE led to a particularly shocking March.

The Premium Fund was also impacted by its exposure to GCI, even though their digitisation strategy is moving ahead. While the Value Fund’s banking holding CUBI was a drag to performance as its share price dropped over 40% during the month in fear it too would collapse. We added to our CUBI holding after the Chairman and CEO bought shares during the market panic.

Positive Contributors

The Premium Fund’s negative performance was somewhat offset by LEGH, our manufactured home builder in Texas that released strong year-end results.

The Value Fund benefited from being more diversified. Its investment in LEGH boosted performance, as did its exposure to some technology and semiconductors companies such as META, INTC, and BABA.


Given how much SRG and LEE contributed to the poor performance of both funds, we did a significant amount of homework on both positions. We checked our investment thesis for each, reworked our calculations, and even spoke to the management of both companies to better understand the economic headwinds. (For those interested in more detail, please feel free to email us for a detailed analysis)

Our work resulted in us adding to both SRG and LEE in the Premium Fund and to LEE in the Value Fund (as SRG was already a significant holding in that more diversified fund.)


Closing Thoughts

While it was a terrible month for both funds, it is essential to point out that the losses are only on paper. Instead of selling out of our losers, we added to them.

We have done our homework, and while SRG and LEE’s share prices might not correct overnight, what is now a drag on performance is a money-making opportunity.  


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