Case Studies

Adding to Our Investment

After Trump’s election, stock market participants sold most Mexican stocks indiscriminately.  While fears of a cancellation of NAFTA remain legitimate, we took the opportunity to underwrite all of the relevant names on our watch list and separate the ones that would likely be affected significantly by a cancellation of NAFTA from the ones that would see a much smaller impact.  Arca produces a non-cyclical good and sells little that crosses the U.S.-Mexico border.  Yet the stock price sold off 23% in dollar terms from the November 2016 election through January 2017.  We took advantage of this macro-based flow to buy more Arca at an attractive price.  The Fund made 45% on those purchases during 2017.

Pancho Garza, Arturo Gutierrez, and their team continue to improve a wonderful business.  Last April, Arca completed its purchase of bottling assets in Texas, Oklahoma, Arkansas, and New Mexico, and management also continues to strategically expand its snack food business in the United States.  We expect their expertise and discipline to enhance this territory through sensible plant improvements and unexplored revenue opportunities.  Macro headwinds in Ecuador and Argentina continue to be somewhat of a challenge, and the prospect of a sugar tax in Argentina exists.  All in all, we are pleased with the way the company is compounding its intrinsic value.  We only wish the stock price would fall again, so we could buy more.