A monthly update of the Compound 8 to 80 Portfolio…
Performance Review and Market Environment
The 8 to 80 Portfolio declined 0.58% (net of fees) in May.
We added to some existing positions during the month on the correction and initiated two new positions.
The broad markets sold off in the first half of May with growth names and technology stocks hit particularly hard. In the back half the month, equities staged a sharp recovery but growth and tech still lagged overall.
This has been a persistent theme in 2021 with the reopening of the economy coinciding with a trend change from growth to value and from Technology to beaten-down sectors such as Energy and Financials.
With the US fast approaching herd immunity, the key question is whether this trend will continue and if so, for how long. Covid-19 cases in the US are now at their lowest levels since the start of the pandemic and more than half the country has been vaccinated. Meanwhile, US air travel is hitting its highest levels since March 2020 and the expectation is for a continued normalization throughout the summer.
The v-shaped recovery in corporate earnings is now complete with S&P 500 EPS hitting a new high in Q1, surging past the prior high from Q3 2018.
Profit margins are also back at record highs, benefitting from the combination of cost cutting during the pandemic and a stimulus-induced surge in revenues.
-Zillow ($Z) reported earnings and revenues that beat expectations. Revenue of $1.2 billion was a new quarterly high, and completed the recovery from the covid-related downturn in 2020. Zillow’s website and app traffic saw 2.5 billion visits in the 1st quarter, a 19% increase over the prior year.
-Peloton ($PTON) announced a recall of their treadmills over safety concerns, calling their initial response to the Consumer Product Safety Commissions’ request a “mistake.” They also reported 1st quarter revenues of $1.26 billion, a new high and a 141% increase over the prior year.
While the stock initially sold off on the news of the recall, it later recovered all of those losses to finish the month up over 12%.
-Jamf ($JAMF)’s consistent growth continues, with a 34% increase in revenues over the last year.
-Alibaba ($BABA) reported record quarterly revenues of $28.6 billion, a 64% increase over the prior year. It also reported its first ever quarterly loss due to a $2.8 billion fine paid for violating China’s anti-monopoly law.
The top performers during May were Peloton (+12.2%) and Shopify (+5.1%).
The bottom performers during May were Zillow (-9.8%) and Alibaba (-7.4%).
Added to Peloton ($PTON), Adyen ($ADYEY), Jamf ($JAMF), and Alibaba ($BABA) on weakness.
Initiated new positions in $MSOS and $GBTC on weakness.
End of Month Exposures
Cash and Cash Equivalents: 20%
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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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