We’ve trimmed several existing holdings for clients in our Offshore strategy to replenish our strategic cash reserve.
We are cognizant that international markets have been challenging, and Titan’s Offshore portfolio has not been immune. We continue to have conviction in select international equities over the long run that meet our rigorous investment checklist (long growth runways, durable competitive advantages, excellent unit economics, attractive valuations). However, we believe current conditions warrant a further de-risking within the portfolio, with a stronger dollar, higher interest rates, elevated energy prices, and an idiosyncratic global recovery from the pandemic challenging equity valuations outside the U.S. more harshly than state-side peers.
The table below summarizes our portfolio adjustments:
We believe these moves accomplish two key things for our clients:
Uranium holdings (URNM/CCJ): We believe demand for uranium amid global interest in nuclear power as a source of renewable energy may be in its early days. In other words, the core tenets of our uranium thesis remain intact. However, these holdings have grown to be some of the largest in the portfolio, and we believe it is prudent to reduce the portfolio’s exposure to this theme.
Alibaba (BABA): As we enter 2022, we believe that we are likely past the peak of regulatory intensity in China and have a broadly sanguine view on Chinese equities given present valuations. However, we are selectively trimming our position in Alibaba as near-term estimates still seem too high as competition in e-commerce is unlikely to abate, in our view.
Sea Limited (SE): Our work suggests the company may be seeing a deceleration in the growth of its gaming and ecommerce businesses, and in this investment climate investors have judged any signs of slowing growth harshly. We believe the company can be a dominant force across all 3 of its categories — gaming, ecommerce, and payments — over the long-run, but believe a smaller position within the portfolio is warranted at this time.
Yandex N.V. (YNDX): As we noted in our update on Friday, geopolitical tensions are worsening in eastern Europe. As a result, we’ve reduced our exposure in this Russian internet conglomerate as we wait for more clarity on the situation.
PagSeguro (PAGS): PAGS has faced considerable macroeconomics headwinds in Brazil as interest rates rise and economic growth slows, putting shares under meaningful pressure over the last several months. While we continue to believe in the company long-term, we believe the macro narrative will continue to drive price action in the near term. When macro stories trump business fundamentals, it is difficult to maintain conviction in a position that warrants a large weighting and believe trimming our holdings in PAGS at this time offers our Offshore strategy a more balanced risk profile.
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