FPA Capital Fund, Inc. Fourth Quarter 2018 Commentary

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Includes: AMBA, ARRS, ARW, CFFN, CISN, CRI, DAN, FHB, FII, FL, GNTX, GPK, HP, ISBC, MATX, RDC, SAVE, TEN, VECO
by: Fund Letters
Summary

FPA is an institutional money management firm. The Fund’s primary investment objective is long-term growth of capital. Benchmark-agnostic portfolio of 20-40 holdings, small- and mid-cap companies with competitive positions.

The FPA Capital Fund, Inc. (“Fund”) was down -18.65% (net) in the fourth quarter of 2018 vs. Russell 2500’s performance of -18.49%. We have previously discussed how expensive valuations have become and warned that this level of what we called “overvaluation”, was not sustainable.

It seems that the market finally arrived to our conclusion – the Russell 2500 hit its lowest level in over 25 months on December 24, 2018.

As of 12/31/2018, the Fund’s portfolio’s earnings multiple is 43% lower than that of the Russell 2500 Index and its price-to-book is 33% lower.

Editor's Note: The summary bullets for this article were chosen by Seeking Alpha editors.