It Was Just A Vacation

By Lauretta “Retz” Reeves, CFA

Every other year, my husband and I cruise through Europe visiting ports I don’t normally get to see when researching investments over there – a conscious attempt on my part to leave my work behind for at least a few days every so often.

This year we reached Lisbon via Paris on a particularly pleasant Air France flight. I couldn’t help but notice that Air France has really upped their game lately, but I’d rather see how those airline anti-trust suits evolve before seriously considering the stock for the Frigate Folio. Surprised that the twenty minute cab ride to the hotel cost only 15 euros, I then made another mental note to review the energy stocks we owned in Frigate and Treasure Harbor – especially Total, whose retail stations seemed ubiquitous on that leg of our trip. And after using my recently acquired Michel Thomas Method Portuguese, we were then able to find a pharmacy where we purchased some meds from Novartis – a Swiss-based pharmaceuticals company that, yes, we also own in Frigate – to offset the aches and pains of those long flights.

Porto was our next stop. None of the companies that provided the copious amount of port we consumed on our trip were publicly-traded, however, which was a shame, because I would have liked to have to come back to do more research. It’s all about the fundamentals, after all.

After that we visited Vigo and El Ferrol in Spain, where I spent one harried afternoon searching for a Banco Santander ATM to purchase some more euros. Incidentally, Banco Santander has been a bit of a disappointing holding in Treasure Harbor for us so far. Ana Botin, the current chair and the former chair Emilio Botin’s successor and daughter, had cut the dividend and initiated restructuring efforts, and the share price corrected sharply afterwards as a result. So Santander is on a bit of a short leash for us, and I am monitoring our holdings there closely.

Our tour guides provided us with an interesting on-the-ground look at Spain’s economy. The country’s unemployment rate was more than 20%, and in the particular region we were touring, that rate was hovering around 30%. However, perhaps sensing deals, tourists were starting to visit the region more frequently, and the locals were hopeful a recovery would eventually arrive. So let’s do our part, people; I suggest we all take advantage of the weak euro, fly over there asap and enjoy as much Spanish wine, tapas and shellfish as we can stand to finally turnaround their economy. It’s the least we could do, no?

In addition to Banco Santander, the Treasure Harbor Folio own shares in Iberdola, a Spanish utility, and in the Yellowtail Folio we also own Ebro Foods, which manufactures and distributes such brands as Mahatma and Panzani. If I saw more signs over there that led me to believe Spain was truly in recovery mode, I might do some work on other smaller Spanish companies. In particular, the ones that made delicious treats. But, alas, they’re not there yet.

After tasting crepes in Brest, France, we spent a day at sea, at which point I could no longer could escape CNN and BBC’s coverage of the unfolding Greek financial tragedy. After our eventual return back to the Keys, the situation would deteriorate further, with the Greek population just yesterday voting down the austerity measures needed to receive assistance from the ECB. We don’t own any Greek companies in any of our portfolios, and those companies with exposure in the country have had plenty of time to anticipate and plan for a potential “Grexit” from the Euro. Nonetheless, volatility in the markets is to be expected as the latest Greek drama plays out, and I am reviewing changes in expectations for our current and potential international holdings.

Following that day at sea and some seal watching, then, we visited a winery and flower garden in the Isles of Scilly. And on the island of St. Mary’s, I enjoyed my first real fish and chips. High winds prevented our tendering to Waterford, so we then proceeded on to Dublin.

In retrospect, I could have tried to set up a visit there with Glanbia, which we own shares of in Yellowtail. Based in Ireland, Glanbia is a leader in performance nutrition and ingredients production and is actually the largest “American-style” cheese manufacturer in the U.S. But never mind that cheese and healthy stuff. Instead, I decided to have my first Guinness. I also took a tour of their six-floor factory, which I enjoyed – along with my first beer in ten years. By the end of the tour, though, I had to concede that I am probably more of a half-pint.

Actually, Guinness is a major brand of Diageo PLC, and though at first glance Diageo’s shares look expensive, I do intend to do more research on this ADR. It could be an attractive buy for us one day if it ever got cheap enough.

Too soon after arriving in Ireland, it was time to board our Delta flight (“Welcome aboard, y’all!”) and head back home. A couple of pounds seem to have transferred from my wallet to my waistline during the trip, and since I only placed third in a blackjack tournament during the trip, I did have to report back to work in the Keys. But as you can tell from the above, part of me never can really put our companies completely out of mind, anyway.

Please drop me a line or give me a call if you want to discuss Greece, learn more about my ports of call, or find a good travel agent, even. Things in Europe will be a bit messy this week, but with a long-term time horizon, that’s really an opportunity. In the meantime, thank you for investing alongside your portfolio managers at IIM!

About Retz Reeves

Portfolio Manager of the Frigate and Treasure Harbor Folios.

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