A monthly update of the Compound 8 to 80 Portfolio…
Performance Review and Market Environment
The 8 to 80 Portfolio declined 6.77% (net of fees) in November.
November was another difficult month in what has been a difficult year for stock picking (see our recent post here).
The major indices continue to mask significant weakness underneath the market, particularly in the high growth technology space.
The multiple compression within this group has been severe (see here), with any hint of a slowdown in revenue met with sharp declines. Many of these stocks were leaders in 2020 and huge beneficiaries of the stay-at-home economy theme. As the economy has reopened, they suffered a multiple contraction when the extremely high expectations investors placed on them did not materialize.
The question everyone is asking: will the weakness in high growth stocks spillover to the major indices or will we see a rebound in the most beaten-down names?
Onto the portfolio…
-Zillow ($Z) reported revenues of $1.74 billion, falling short of estimates of $2.01 billion. They also reported a loss of 95 cents per share vs. expectations for a profit of 16 cents. The big news was that Zillow is abandoning its home-flipping business (“Offers”), which lost $422 million during the most recent quarter, and cutting 25% of its workforce.
The stock gapped down after the news and continued to fall throughout the remainder of the month. It’s now back to May 2020 levels with its Price to Sales ratio moving from 14x to 3x.
-Airbnb ($ABNB) reported its highest quarterly revenue ever ($2.24 billion), surpassing expectations of $2.05 billion. It also reported $834 million in net income, up 280% over the last year. In its shareholder letter, they credited the strong numbers to the “travel rebound” and a “revolution in how we live and work,” where “millions of people can now take more frequent trips, take longer trips, travel to more locations, and even live anywhere on Airbnb.”
-Jamf ($JAMF) reported new highs in revenue again, up 35.5% over the last year.
The stock was hit hard, however, on the announcement of “Apple Business Essentials” which was viewed as a potential competitor. The CEO of Jamf (Dean Hager) took a more optimistic view, calling it a “terrific opportunity,” saying “we are going to fill the gap between what Apple builds and the enterprise requires.”
-Farfetch ($FTCH) revenues continued hit new highs, up 33% year-over year.
The stock fell to a 52-week low, however, as the numbers fell short of estimates ($583 million) and this is the slowest YoY growth rate the company has seen.
–Zoom ($ZM) reported record revenues ($1.05 billion, +35% YoY) and net income ($340 million, +72% YoY).
The stock fell sharply after the report, however, as revenue growth is expected to continue to slow (to 19% YoY in Q4 from 33% in Q3).
The top performers during November were Apple (+10.5%), Ethereum Trust (+7.6%), and Amazon (+4.0%).
The bottom performers during November were Zillow (-47.6%), Jamf (-32.4%), and Zoom (-23.0%).
-Reduced position size in Ethereum Trust after a large advance.
-Sold Peloton position.
-Added Airbnb to the portfolio.
-Reduced position sizes in McDonald’s and Nike.
End of Month Exposures
Cash and Cash Equivalents: 32%
To learn more about the 8 to 80 portfolio managed by Compound, read our post and FAQ here.
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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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