International Portfolios: 1st Nine Months 2024, International Client Letter

Buoyed by moderating inflation and interest rates, US equity indices generally ended in positive territory for the third quarter and nine months.  Large cap value indices, however, outperformed comparable growth indices for the quarter, although for the nine months, growth was still ahead. Internationally, value aggregate indices outperformed growth for both periods.  

The International Equity Income Portfolio (previously named Frigate) performed well in the third quarter, but still trailed its new benchmark on a gross basis for the first nine months of 2024. Burberry, Adecco and Grifols remained among the biggest detractors. Taiwan Semiconductor was by far the best performer, while enterprise resource planning provider SAP had a great run on the heels of growing cloud revenue. Several other stocks returned greater than 30%, with household and personal product provider Unilever leading the pack. Since inception, Folio estimates the International Equity Income Portfolio’s time-weighted,  cumulative, gross return as 109.2%.  

With our trading/custodian platform’s expansion of available securities to purchase, especially in Asia and emerging markets, we have chosen a broader benchmark for the portfolio. Although its industry and geographic diversification will not likely mirror that of the benchmark, it will be managed with some sensitivity to its complexion.  To that end, over the past quarter additions to the model included stocks in Japan and emerging markets, which, for the most part, have been additive.  

On a gross basis, the Value International Equity Portfolio’s (previously named Treasure Harbor) performance was competitive versus the benchmark for the first nine months of 2024. Consistent from the first half, Spark New Zealand, Rogers Communication and AMBEV were among the worst performers. UK banks Barclays and Lloyds remained among the strongest performers. Unilever, which is held in both models, also was did well. Since inception, Folio estimates this portfolio’s time-weighted, cumulative gross return as 73.73%.  

I was fortunate enough in September to attend the fantastic Baader Investment Conference in Munich, Germany. where over 200 public companies from Germany, Switzerland and Austria presented and/or held meetings with investors. Certainly, there are challenges for European companies: energy is more expensive since the war in Ukraine, inflation has impacted input costs and uncertainties regarding new regulations, geopolitical disruption and elections create difficulties in planning and executing strategies. Meeting after meeting, however, I witnessed ingenuity, confidence and the resolution to overcome current and future challenges. I will use the information gathered to update my investment outlook for our current holdings and new opportunities I encountered. Many thanks to Baader for this amazing opportunity.  

Recently, we in the Southeastern United States faced the devastation wreaked by Hurricane Helene and Hurricane Milton. There are many institutions that would value your donations.  For example, The World Central Kitchen https://wck.org  , mentioned in a previous letter for their work in the Ukraine, was quickly on the scene providing meals in Asheville. From my experience after Hurricane Irma, Community Foundations serve their populations both immediately post the storm and long after; the Community Foundation of Western North Carolina, https://cfwnc.org  , is taking donations and applications for assistance.  Of course, The American Red Cross will take both monetary and blood donations and help survivors find each other and places to stay – https://www.redcross.org.  

We hope that you and your family stay safe. In the meantime, please contact Cale or myself if you have any questions about our investment outlook or any of our portfolios.