Stanphyl Capital April 2016 Letter
Stanphyl Capital letter for the month ended April 30, 2016. Friends and Fellow Investors: For April 2016 the Stanphyl Capital Fund was up approximately 2.1% net of all fees and expenses. By way of comparison, the S&P 500 was up approximately 0.4% while the Russell 2000 was up approximately 1.6%. Year to date the fund is up approximately 11.4% net while the S&P 500 is up approximately 1.7% and the Russell 2000 is unchanged. Since inception on June 1, 2011 the fund is up approximately 93.1% net while the S&P 500 is up approximately 70.5% and the Russell 2000 is up approximately 42.8%. (The S&P and Russell performances are based on their “Total Returns” indices which include reinvested dividends.) As always, investors will receive the fund’s exact performance figures from its outside administrator within a week or two. In mid-April I increased our short position in the S&P 500 (via the SPY ETF) when it came within 2% of its all-time high, as I believe the broad market is now even more overvalued within the context of sliding profit margins and awful corporate earnings… …which I expect to further decline as the world enters a recession. Meanwhile, the S&P 500’s price-to-sales multiple is nearly back to the bubble level of 2000: Trailing S&P 500 GAAP earnings (including the preliminary Q1 2016 estimate) are approximately just $88 and a 16x multiple on that (generous if earnings stay flat or worsen as I expect them to, and yet some “generosity” is probably warranted considering how low interest rates are) would put the S&P 500 all the way down at 1408 vs. its April close of around 2065.