8 to 80 Monthly Update – October 2021

By Charlie Bilello

02 Nov 2021

A monthly update of the Compound 8 to 80 Portfolio

Performance Review and Market Environment

The 8 to 80 Portfolio gained 7.83% (net of fees) in October.

The mild correction that began in early September proved to be yet another opportunity to buy the dip, with the broad markets racing back to new all-time highs.

The S&P 500 has now hit 59 all-time highs on the year, needing only 19 more to break the record set in 1995 (77).

Earnings continue to surprise to the upside, with S&P 500 EPS on pace for another record quarter (note: 62% of companies reported as of 10/31/21).

On the covid-19 front, the Delta wave continues to subside, with hospitalizations in the U.S. down 56% from the their peak in early September.

As for the biggest macro issue, rising and persistent inflation, the equity markets continue to take that in stride.

The PCE price index rose 4.4% over the last year, its highest level of increase in 30 years.

All eyes will be on the Fed as they meet in early November, with market participants expecting a tapering of asset purchases while still maintaining 0% rates.

The inflationary backdrop combined with an extraordinarily easy Fed and a National Debt fast approaching $29 trillion (with a few trillion more on the way), have been a walking billboard for Bitcoin. And indeed, the favorite among crypto assets hit new highs in October, surpassing its previous highs from April and now more than doubling on the year (after quadrupling last year).

Onto the portfolio…

Portfolio Updates

-Netflix ($NFLX) reported subscriber growth of 4.4 million during the quarter, surpassing analyst estimates of 3.8 million. It now has 214 million global subscribers, up 9% over the past year. 8.5 million more are expected to be added in Q4.

Revenues hit a new quarterly high ($7.48 billion), increasing 16% year-over-year.

While this is the slowest growth rate for the company since 2012, the stock still hit new highs. Investors are clearly looking ahead to what the company expects to be their “strongest Q4 content offering ever,” which follows an incredible run in September during which Squid Game became their biggest TV show ever (142 million households watched in first 4 weeks).

-Meta ($FB) is the new name for Facebook, with the company revealing their bold plans to invest in the metaverse.

-Alphabet ($GOOGL) reported another record quarter, beating analyst expectations on the top (revenue of $65.1 billion vs. $63.3 billion estimate) and bottom ($27.99 EPS vs. $23.48 estimate) line. Revenues are up 41% year-over-year.

The stock is up 68.9% on the year…

-McDonald’s ($MCD) beat expectations on revenues ($6.2 billion vs. $6.0 billion estimate) and earnings ($2.76 EPS vs. $2.46 estimate). Same-store sales increased 9.6%, driven by its new chicken sandwich and other menu and marketing promotions. McDonald’s launch a U.S. loyaly program in early July and has already enrolled more than 21 million members.

-Spotify ($SPOT) reported monthly active users of 381 million, up 19% over the prior year.

-Apple ($AAPL) missed sales estimates ($83.4 billion vs. $84.9 billion expected) with CEO Tim Cook attributing the weaker numbers to supply constrains on iPhones, iPads, and Macs. Apple estimated that revenue was $6 billion lower than it would have been without these constraints. Revenues still grew an impressive 29% year-over-year, with iPhone revenue up 47% (year-over-year).

-Amazon ($AMZN) missed on both revenues ($110.8 billion vs. $111.6 billion estimates) and earnings ($6.12 EPS vs. $8.92 estimates). Its 15% year-over-year increase in sales was its slowest growth rate since 2014. A few issues are causing this deceleration: 1) increased competition as consumers go back to physical stores, 2) supply chain challenges, and 3) higher costs (labor shortage, increased freight/shipping costs). As a result, Amazon is forecasting profits of $0 to $3 billion in Q4 versus $6.9 billion in Q4 2020.

After a strong run in 2020, the stock has traded sideways this year…

-Mastercard reported a new high in both revenue (+30% YoY) and Net Income (59% YoY), recovering fully from the covid downturn. The company also announced that it will soon enable banks and merchants on its payment network to integrate cryptocurrency into their products.

-Shopify ($SHOP) continues to be one of the fastest growing companies in the tech space, with revenues hitting a new quarterly high of $1.12 billion. This was a 46% year-over-year increase.

Portfolio Movers

The top performers during October were Ethereum Trust (+49.8%), Bitcoin Trust (+46.8%), and Spotify (+28.4%).

The bottom performers during October were US Cannabis ETF (-14.1%), Meta (-4.7%), and Mastercard (-3.4%).

Portfolio Changes

Sold position in Twitter ($TWTR).

End of Month Exposures

Invested: 75%
Cash and Cash Equivalents: 25%

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.

For our full disclosures, click here.

About the author

Charlie Bilello

Charlie is the founder and CEO of Compound Capital Advisors.

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