Q4 2018 Investor Letter

January 9th, 2019

For the fourth quarter of 2018, Shaperfunds generated a total return of -7.32%, versus a -13.97% return for the Standard and Poor’s 500 Index. The out-performance in the quarter was, in large part, due to the out-performance of the largest holding, Tesla Inc (TSLA), which was not always the case in 2018. Shaperfunds generated a -3.51% return for the full year 2018, versus a -6.2% return for the index.

Since the beginning of 2015, Shaperfunds generated a 44.03% return, versus a 32.17% return for the Standard and Poor’s 500 Index.

Future expected returns are a function of current valuations. Right now, valuations across different world regions are telling an interesting story:

S&P 500 Index Price/Earnings Ratio: 19.55

FTSE Developed ex US Index Price/Earnings Ratio: 12.6

FTSE Emerging Markets Index Price/Earnings Ratio: 12.2

Foreign stocks, which historically have similar price/earnings ratios as the U.S., are clearly out of favor. Emerging markets have higher growth, better demographics and more opportunity to create wealth. Despite this, there’s a major discount in most markets outside North America.

Right now, our split between US and foreign stocks is 68:32. I’m looking for opportunities to move that split closer to 50:50 throughout 2019.

Shaperfunds holdings and percentage of portfolio, as of close on 1/7/18:

Tesla Inc 19.56%

Schwab Intl Equity ETF 11.17%

Schwab Emerging Markets ETF 10.98%

Apple Inc   5.53%

JPMorgan Chase & Co 5.41%

BlackRock, Inc 4.59%

Activision Blizzard, Inc 4.21%

Amazon.com, Inc 3.81%

Facebook, Inc 3.55%

General Electric Company 3.55%

Tencent Holdings 3.44%

Spotify Technology 2.79%

Alphabet Inc 2.5%

Charlotte’s Web Holdings Inc 2.21%

Twitter Inc 2.05%

AT&T Inc 2.02%

Scotts Miracle-Gro Co 2%

salesforce.com, inc 1.99%

Constellation Brands, Inc 1.99%

Hain Celestial Group Inc 1.83%

Gilead Sciences, Inc 1.76%

American Express Company 1.6%

Baozun Inc 1.47%

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