Portfolio Returns
The markets were relatively flat during the quarter. The S&P 500TR was up by 0.96%, the Morningstar Total US Equity Index was up 1.28% and the Nintai Proxy (80% Vanguard US Equities Total Market Index, 15% Vanguard Global Equities Total Market Index, and 5% Cash) was up 1.7%. The Nintai Portfolio handily beat the averages gaining 8.8% net all fees.
Several stocks drove our performance this quarter. Terra Nitrogen (TNH, Financial) was up 45%, Novo Nordisk (NVO, Financial) was up 26%, and Manhattan Associates (MANH, Financial) was up 24%. Several companies brought up the rear with Fastenal (FAST, Financial) down 12%, Dolby Labs (DLB, Financial) down 11%, and Qualcomm (QCOM, Financial) down 6%.
The following is the breakdown of returns by 3YR, 5YR, and 10YR.
| YTD | 3YR | 5YR | 10YR | |
| Nintai Portfolio (net fees)* | 8.8% | 11.7% | 16.0% | 15.4% |
| S&P 500 TR | 1.0% | 16.1% | 14.3% | 8.1% |
| Morningstar US Market Index | 1.3% | 14.1% | 12.4% | 6.3% |
| Nintai Proxy* | 1.7% | 11.5% | 10.8% | 5.6% |
All data generated by Morningstar
* Includes management fee of 0.75% of AUM
**Vanguard Total International Stock Index (20%), Vanguard Total US Market Stock Index (70%), Cash (10%)
Portfolio Changes
We made four (4) changes in the portfolio this quarter. That might be a record! First, we said goodbye to Factset Research (FDS) that was trading in excess of 40% of its estimated fair value. In its place we purchased Computer Modelling Group (CMDXF). Our reasoning can be found in much greater detail in our article "Changes in the Nintai Portfolio" published on February 20 and can be found here. We sold roughly one-third of our holdings in Novo Nordisk as it had reached nearly 11% of our portfolio. Finally we sold one-half of our position in Manhattan Research due to valuation and its size in the portfolio. Cash currently stands at roughly 9% of assets under management. Portfolio turnover was an appalling 11.7% during the quarter.
Portfolio Positioning
The current P/E ratio of the portfolio is 16.2 or roughly 13% less than the current S&P 500 ratio. Projected earnings growth over the next 5 years is 13.9%, or roughly 50% greater than the S&P 500. Additional measures can be seen here on the Nintai Abacus report:
Thoughts On The Quarter
While extremely pleased with the portfolio over the past quarter, we continue to keep our eye on the measure that really matters – long time returns. We believe the markets are currently trading at fair value. I have absolutely no idea where the markets are headed in the short term, but we do believe returns over the next 5-10 years will be muted. To be prepared for the inevitable downturn we remain focused on downside protection – pristine balance sheets, generous free cash flow, wide competitive moats, and management focused on generating significant returns on capital employed.
Just as in the crash of 2000 and 2008/2009, we remain vigilant in seeking out companies that meet our investment criteria. We hope to see a significant drop if it makes some companies on our watch list trade at a significant discount to fair value. We have roughly 9% of our portfolio in cash eagerly awaiting such an opportunity.
The current Nintai Portfolio consists of the following holdings:
| Name/Ticker | Percent (%) Holding |
| Synaptics (SYNA) | 9.7% |
| Cash | 8.6% |
| Terra Nitrogen (TNH, Financial) | 7.9% |
| Cognizant Technology (CTSH) | 7.7% |
| T Rowe Price (TROW) | 6.9% |
| Novo Nordisk (NVO, Financial) | 6.9% |
| Manhattan Associates (MANH, Financial) | 6.5% |
| Mastercard (MA) | 5.5% |
| Expeditors International (EXPD) | 4.2% |
| Fastenal (FAST, Financial) | 3.6% |
| Ansys (ANSS) | 3.4% |
| Blackrock (BLK) | 3.4% |
| Dolby Labs (DLB, Financial) | 3.3% |
| Computer Modelling Group (CMDXF) | 3.3% |
| Waters (WAT) | 3.3% |
| Computer Programs and Systems (CPSI) | 3.2% |
| Baxter International (BAX) | 2.8% |
| Morningstar (MORN) | 2.4% |
| Qualcomm (QCOM, Financial) | 2.2% |
| New Oriental Education (EDU) | 2.1% |
| Hermés (HESAY) | 1.9% |
| Coach (COH) | 1.4% |
