A monthly update of the Compound 8 to 80 Portfolio…
Performance Review and Market Environment
The 8 to 80 Portfolio gained 2.69% (net of fees) in April.
After a sharp pullback in March, there was a recovery in higher growth and Tech names in April, but on a relative basis they’re still exhibiting underperformance this year after a strong 2020…
Stock-specific factors dictated performance to a larger degree as a number of portfolio companies reported earnings during the month. Let’s take a look at the winners and losers from those reports…
–Amazon ($AMZN) gained 12.1% during the month, hitting a new high for the first time since last September.
It posted huge beats on both the top line ($108.5 billion revenue vs. $104.5 estimate) and bottom line ($15.79 EPS vs. $9.54 estimate). The 44% increase in sales YoY was its highest growth rate since 2011 and its 78th consecutive quarter of double-digit revenue growth.
-Google ($GOOGL) gained 14.1% during the month, extending its gains on the year, and hitting new highs once again.
Like Amazon, it posted enormous beats in revenue ($55.3 billion vs. $51.7 estimate) and earnings ($26.39 EPS vs. $15.82 estimate).
Driven by new highs in ad spending, Google’s revenue growth of 34% was its highest growth rate since 2013.
YouTube continues to be a standout performer with revenues topping $6 billion, a 49% increase from the prior year. Usage grew from 73% of US adults in 2019 to 81% in 2021, the “most significant growth of any social media app among American users during the pandemic.”
–Apple ($AAPL) gained 7.6% during the month and reported a blowout quarter of revenues ($89.6 billion vs. $77.3 estimate) and earnings ($1.40 EPS vs. $0.99 estimate).
The 54% increase in revenues over the prior year was the highest growth rate for Apple since 2012.
The stimulus-induced spike in consumer spending directly benefitted Apple with a surge in iPhone (+66% YoY), iPad (+79% YoY) and Mac (+70% YoY) sales.
-Facebook ($FB) shares gained 10.4% in April, hitting new highs for the first time since last August.
Earnings of $3.30 per share topped estimates of $2.37 by a wide margin, as did sales ($26.2 billion vs. $23.7 estimate).
The 48% increase in revenues over the last year was the highest growth rate since 2018.
Monthly active users grew 10% to a record 2.85 billion. An incredible stat: 36% of the world’s 7.86 billion population logged into Facebook last month. If you include the entire Facebook family of apps (Facebook, Instagram, Messenger, WhatsApp) this rises to 3.45 billion monthly active users and 44% of the world’s population.
-Shopify ($SHOP) gained 6.9% on the month, posting another big beat on earnings ($2.01 adjusted EPS vs. $0.75 estimate) and revenues ($988.6 million vs. $862.7 estimate).
As one of the primary beneficiaries of the covid-induced boom in ecommerce, its sales grew 110% over the prior year, the highest growth rate on record (data going back to 2015).
-Mastercard ($MA) gained 7.4% to new highs during the month. Shares were boosted by better-than-expected net revenues of $4.2 billion (vs. $4.0 estimate) as government stimulus boosted consumer spending. The company noted an improvement in domestic travel during the quarter and expects this trend to continue throughout the year.
-McDonalds ($MCD) gained 5.3% in April, ending the month at new highs.
Net Income of $1.54 billion grew 39% year-over year while same store sales increased 7.5% to surpass 2019 levels.
-Netflix ($NFLX) declined 1.6% during the month and its stock gapped lower after reporting 4 million new subscribers which missed estimates of 6.2 million. Explaining the miss, the company cited a “covid-19 pull forward in 2020” and a “lighter content slate due to covid-19 production delays.”
Revenue growth topped 20% for the 32nd consecutive quarter.
-Twitter ($TWTR) shares fell 13.2% during the month, with much of the decline coming after reporting a miss in estimates of monetizable daily active users (199 million vs. 200 million estimate).
As ad spending recovered, revenues grew 28% over the prior year, the highest growth rate since 2018.
-Spotify ($SPOT) shares fell 5.9% during the month as its user growth numbers missed estimates.
Wall street was expecting 360 million active users and Spotify reported 356 million, a 24% increase over the prior year.
Howard’s note: “Spotify is digesting big gains as the audio war expands. In the long term, with the founder led Spotify and focus, I have no major concerns that Spotify can’t continue to grow fast and improve their financial metrics as well.”
-Peloton ($PTON) shares fell 12.5% during the month, reversing early month gains after the US Consumer Product Safety Commission announced that it is looking into the safety of its high-end treadmill that has been linked to numerous injuries and one child’s death. Peloton stated that it will not recall the $4,300 Tread+, arguing that it is safe when “warnings and safety instructions are followed.”
The top performers during April were Google (+14.1%) and Amazon (+12.1%).
The bottom performers during April were Twitter (-13.2%) and Peloton (-12.5%).
End of Month Exposures
Cash and Cash Equivalents: 28%
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Disclaimer: All information provided is for educational purposes only and does not constitute investment, legal or tax advice, or an offer to buy or sell any security.
Past performance is no guarantee of future results. Performance results are shown net of fees and include dividends and other adjustments. All performance data is strictly illustrative and may differ from actual results.
Discussion of portfolio holdings are for illustrative purposes only and are not investment recommendations. The portfolio holdings are subject to change at any point in time.
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