McIntyre Partnerships Q2 Letter: Long Spirit MTA REIT

McIntyre Partnerships June 2018 letter to investors for Q2 / H1 can be found below.

Dear Partners,

I hope you are all enjoying a nice start to summer. While the fund's returns were relatively uneventful in Q2 and H1 2018, we have added several new ideas.

McIntyre Partnerships Monthly Net Returns (1)

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Performance Review - Q2 2018

Through June, McIntyre Partnerships returned -0.3% gross and -1.1% net. This compares to S&P 500 and S&P 600 returns, including dividends of 2.0% and 9.4%, respectively.

Year to date, our performance remains weak. Much like Q1, our performance has no substantial winners or losers. As always, I do not consider three-month performance relevant for our concentrated portfolio. Over many years, we will have stretches of lackluster underperformance, and we will always struggle to keep up with a 10% quarterly index advance (particularly if we have few bets related to said index).

In Q2, we had no significant (>100bps) losers. In the win column, our CBS loss reversed and, combined with DISCA (collectively, our "media" basket), contributed ~250bps in Q2. YTD, our only large losers are LILAK (~100bps) and CDR (~80bps). DDS (~150bps) and our media basket (~100bps) are our only YTD significant winners.

Portfolio Review - Exposures and Concentration

As of June end, our exposures are 127% long, 29% short, and 98% net. Our five largest positions were 76% gross exposure and our ten largest were 108%.

Our five largest positions are CBS/DISCA, LILAK, our small-cap financials basket, SMTA, and FBHS.

~72% of the portfolio is what I would consider a non-cyclical business (cable, beer, cell towers, etc.). ~61% of the portfolio has a "hard catalyst" (spinoff, merger, asset sale, etc.), while another ~30% have "soft catalysts" (earnings beats, price increases, etc.).

Portfolio Review - Existing Positions

CBS/DISCA

Legacy media generally rallied in Q2, and our "media basket," which consists of a large bet in CBS and a more modest bet in DISCA, broadly participated. The space reacted favorably to the TWX/T merger prevailing in court, which increased the potential for vertical integration. Further, year-to-date (YTD) pay-TV fundamentals have been better than feared: TV ad dollars remain stable, and OTT pay-TV subs continue to offset declines in traditional linear cable.

For CBS, two news stories have broken out: a boardroom drama, and sexual misconduct charges against CEO Moonves. During the quarter, CBS's board sued its controlling shareholder, National Amusements (NAI), seeking to dilute NAI's stake and fend off a merger with VIA. Personally, I am favorable towards the CBS+VIA merger given VIA's distressed price and substantial "hidden" asset value, but most market participants disagree. As the lawsuit puts a forced VIA merger on hold, shares reacted favorably.

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