August 2024 Portfolio Review
August 2024 Portfolio Review
The Hedge Vision portfolio has returned 25.49% YTD
August was a quiet month for my portfolio, as I made only one trade. Despite a rough start to the month, both the S&P 500 and the Nasdaq 100 finished strong with each index returning nearly 4%.
During August, the Hedge Vision portfolio increased by 7.65%, bringing its YTD return to 25.49%. That compares to the S&P 500’s YTD return of 20.20% and the Nasdaq 100’s return of 18.95%.
Total Positions: 23 compared to 26 as of Dec. 31
Top 10 Positions Concentration: 76.9% compared to 73.8% as of Dec. 31
Rest of Portfolio: 13.6% compared to 19.4% as of Dec. 31
Cash: 9.5% compared to 6.8% as of Dec. 31
My monthly gains were led by MercadoLibre (MELI), which rose by 28.37% following a stellar earnings report. CrowdStrike (CRWD) was also a top performer with a return of 23.66%.
CRWD reverted to a double-digit allocation of 10.3% compared to 9.3% at the beginning of August. I’ve shared my thoughts about the outage to contributing members on Substack Chat and have addressed it in my July Portfolio Review as well.
To sum it up, I don’t believe that the outage will have any long-term effects. CEO George Kurtz echoed this with his reiteration of CrowdStrike reaching $10 billion in ending ARR by FY 2031.
“We expect these headwinds to remain in varying degrees for about a year with acceleration starting in the back half of next year. From the longer-term perspective, we expect to see operating margin improvement on an annual basis in FY '26. Additionally, we remain committed to reaching $10 billion in ending ARR by the end of fiscal year 2031 and achieving our target non-GAAP operating model on an annual basis by fiscal year 2029.”
-CEO George Kurtz, Q2 FY 2025 Earnings Call
“So, I think that this type of incident has a half-life, right? So, there'll be a diminishing impact over time. So, Q3 will be harder than Q4. Q4 will be harder than Q1 and so on and so forth. I think the biggest piece for us is that when we get to the back half of next year, we'll start to see an acceleration in the business. And that's the big picture. And that's what I want everybody to walk away from.”
-CFO Burt Podbere, Q2 FY 2025 Q2 Earnings Call
August 2024 Buys
New Positions: None
Increased Positions: None
August 2024 Sales
Exited Positions: None
Reduced Positions: Nvidia (NVDA)
I sold 6.67% of my NVDA before its earnings at $124.32. I have concerns about the sustainability of Nvidia’s growth amid a dynamic and competitive landscape.
Nvidia is currently the third largest company in the world, trailing behind Microsoft and Apple. That limits its upside and no one should expect another 10x from here.
Additionally, Nvidia’s top five customers account for 50.46% of its revenue with 3 of them using up over 40% of their capital expenditures on Nvidia alone. Four of these customers, Microsoft, Meta, Alphabet, and Amazon, are megacap giants. Super Micro Computer is the last customer.
What happens if these customers reduce their demand? That’s a possibility if AI revenues don’t live up to expectations.
In addition, all four megacap customers have announced plans to create their own AI chips during the past year. I don’t expect these potential competitor chips to match the efficiency of Nvidia’s chips any time soon, although any progress could result in a reduction of demand.
With that said, I don’t believe that the AI cycle is over with Nvidia as my fourth largest position at 8.4%. At the same time, Nvidia’s outsized market cap means that other investments could offer more upside.
Plan for September
September has historically been the worst performing month of the year with an annualized loss of 13.5% since 1928. However, the last three months of the year all offer positive returns and create a “buy the dip” scenario.
Still, given that 2024 is an election year, the chances of elevated volatility are, well, elevated.
For example, Kamala Harris recently proposed policies to increase the max capital gains tax to 44.6 from 23.8% (both of these figures include the NII surtax) while imposing a 25% unrealized capital gains tax for those with a net worth of at least $100 million, which is roughly 10,000 people in the U.S. Both of these potential policies could create selling pressure.
That’s fine for me, as I have cash to deploy. I have ELF and CELH on my watchlist and have grown more bullish on BABA in recent weeks given its upcoming Stock Connect availability, which is expected to occur on September 9, as well as supportive measures from the Chinese government.
Stock Connect will provide over 200 million investors in mainland China with access to BABA compared to previously just investors in Hong Kong. The Shanghai and Shenzhen exchanges will soon be able to connect with the Hong Kong Exchange, where BABA is listed.
Overall, I expect all-time highs by the end of the year with a side of presidential election volatility.
Hedge Vision - Institutional Insights
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