A monthly update of the Compound 8 to 80 Portfolio…
Performance Review and Market Environment
The 8 to 80 Portfolio gained 0.59% (net of fees) in August.
The equity markets in the U.S. have been unusually calm thus far in 2021, with the S&P 500 already posting 54 all-time highs and doing so without a pullback greater than 5% (on a closing basis).
Investors should not view this as a sign that risk has been eradicated. There’s always risk lurking beneath the surface; you just don’t always see it. Corrections are the norm, not the exception, and another one is surely coming – we just don’t know when.
For now, investor sentiment, particularly in the U.S. is just about as optimistic as we’ve ever seen, with nearly all news being good news. Stocks are hitting new highs at a faster pace than ever before, earnings are supportive (record highs), the economy is booming (new highs in GDP), and the Fed is maintaining the easiest monetary policy in history.
Even the rise of the Delta variant does not seem to be worrying investors, as they have been conditioned to believe that if it were to impact the economy it would only mean more stimulus to come.
As one might expect, caution is being thrown to the wind as the greatest fear today is not losing money but missing out on further upside. That is a narrative that will only change with price. Market participants have a short memory, and for many risk has to be seen to be believed. They’ve simply forgotten what it looks like and are behaving accordingly.
Onto the portfolio…
It was another busy month for earnings, with a number of portfolio companies reporting.
-Zillow ($Z) revenues hit a new high of $1.31 billion in Q2, up 70% over the prior year.
One of the big winners last year, the stock has struggled in 2021 and hit new YTD lows after earnings. We added to the position on weakness during the month.
-Jamf ($JAMF) continues to show strong and steady growth, posting a 39% increase in revenues to new highs.
The stock has been rangebound over the past year but lately has started a slow move higher.
-Adyen ($ADYEY) reported revenues of $5.56 billion over the last year, a 64% increase from a year ago.
Net Income was up 67% to $441 million.
The stock hit new all-time highs for the first time since February and is now our largest position.
-Elastic ($ESTC) revenues continue to trend higher, up 50% year-over-year.
The stock has rebounded nicely from its correction lows in May…
Peloton reported a dip in revenues with growth decelerating to 54% YoY.
The stock sold off after the company reported a bigger-than-expected loss (-$1.05 EPS vs. $0.45 estimated) from the treadmill recall and a disappointing outlook for next quarter ($800 million revenue vs. $1.01 billion estimated).
-Zoom ($ZM) reported revenues of above $1 billion for the first time, up 54% over the prior year.
Net income increased 70% to a new quarterly high.
Despite beating expectations on both the top and bottom line, shares sold off following the report as investors adjust to more difficult comps and a slower-growth trajectory.
The top performers during August were Ethereum Trust (+46.7%), Adyen (+19.3%), and Netflix (10.0%).
The bottom performers during August were Zoom (-23.4%), Farfetch (-16.5%), and Peloton (-15.1%).
Added to Zillow ($Z), Zoom ($ZM), and Farfetch ($FTCH) on weakness.
End of Month Exposures
Cash and Cash Equivalents: 23%
To learn more about the 8 to 80 portfolio managed by Compound, read our post and FAQ here.
To sign up for our free newsletter, click here.
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.
For our full disclosures, click here.