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Second Quarter 2018 Letter: Mind the (Expectations) Gap

Our second quarter letter explores the primary driver of our recent performance: large gaps between trading consensus and reality. We have continued to refine this ranking framework, and we explain further in our short 3.5-page letter. Click here to read our Q2 2018 letter to investors.

Speed Read:

  • We had another decent quarter (+11.7% in Traditional and +12.8% in Global Micro);
  • Most recently, the expectations vs. reality roadmap ranking criteria has been the most important driver of returns and we’ve re-allocated capital towards those ideas where the market is increasingly missing the forest for the trees;
  • We discuss the processes that drive insight and value creation and how we endeavor to be at the center of efforts to accelerate both for all of our stakeholders, including our co-investment.

Second quarter 2018 letter to investors.

This Post Has 5 Comments

  1. BNP published a very bearish report for telecom Italia, 50 pages long with a lot of info-graphics… basically predicting a perfect storm for telecom Italia involving continued ARPU decline from increased Iliad and OF competition and worse conditions in the Brazilian subsidiary.
    Predictions, of course, are very hard especially for the future…
    It seems BNP are bearish regarding TI for a long time (for a long time I suspect that in some cases sell side sometimes just “don’t like “or “just love “a company and that is random).
    Any insight or new thinking regarding risk reward in the case for telecom Italia?
    Thanks! Adam

    1. Hey Adam, we don’t agree with Exane’s analysis and find it surprising that they could “downgrade” their view on a company that they’ve been bearish on for a long while now. We are going to be posting an update on TI for our investors.

  2. Please consider making it more public, Bulls could use a clear voice based on deep company and industry research. Of course, management should be the driving force behind value creation and I believe almost everybody understands what needs to be done (but so far, it’s not happening).

    1. Will be happy to send it to you Adam – please email me personally ( but, as this very letter that we’re commenting under suggests – we LOVE pessimism in the face of neutral/positive fundamentals. We prefer short interest to ramp meaningfully. As long as they are wrong, they will drive future velocity to the upside for us.

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