October 2024 Portfolio Review
October 2024 Portfolio Review
The Hedge Vision portfolio has returned 28.02% YTD
In October, the S&P 500 barely finished in the green with a 0.02% gain while the Nasdaq 100 rose by 0.63%. Halloween turned out to be a spooky day after all, as both the S&P 500 and Nasdaq 100 nearly gave back all of their monthly gains.
The Hedge Vision portfolio fell by 1.30% in Oct., bringing its YTD return to 28.02%. That compares to the S&P 500 and the Nasdaq 100’s YTD returns of 21.66% and 21.00%, respectively.
Total Positions: 24 compared to 26 as of Dec. 31
Top 10 Positions Concentration: 78.3% compared to 73.8% as of Dec. 31
Rest of Portfolio: 15.3% compared to 19.4% as of Dec. 31
Cash: 6.4% compared to 6.8% as of Dec. 31
My monthly gains were led by Nvidia (NVDA), which returned 13.5%. Excluding Oct. 31, Nvidia’s monthly gains were 19%.
The news of EY resigning as Super Micro Computer’s (SMCI) auditor on Oct. 30 sent shockwaves across the semiconductor industry. The selloff in NVDA isn’t entirely surprising when considering that Super Micro is Nvidia’s third-largest customer and was responsible for 8.62% of the company’s revenue in Q2.
Super Micro’s potentially sloppy or fraudulent accounting brings uncertainty to NVDA and raises the question: Will Nvidia still be able to meet/beat its guidance and analysts’ expectations?
If demand for the company’s chips is “insane,” as CEO Jensen Huang has been saying, then the potential loss of some or all of Super Micro’s demand would be swallowed up by other customers. Amazon and Microsoft have backed up Huang’s words:
“I think pretty much everyone today has less capacity than they have demand for. And its really primarily chips that are the area where companies could use more supply.”
-Amazon CEO Andy Jassy, Q3 2024 Earnings Call
“We expect capital expenditures to increase materially on a sequential basis driven by cloud and AI infrastructure investments. As a reminder, there can be normal quarterly spend variability in the timing of our cloud infrastructure build-outs and the timing of finance leases. We continue to bring capacity online as we scale our AI investments with growing demand. Currently, near-term AI demand is a bit higher than our available capacity”
-Microsoft CFO Amy Hood, Q3 2024 Earnings Call
My buys and sales in real-time, as well as further analysis and commentary, are shared with contributing members on Substack Chat:
Crocs (CROX) was my top loser following an earnings plunge attributed to HeyDude. CROX finished the month down by 23.9%.
As has been the case with previous quarters, weakness in HeyDude has put a storm cloud over the foam clogs company. This comes despite Crocs’ consistent cash flow generation, industry-leading margins, and history of buybacks.
In April, HeyDude appointed Terence Reilly, best known for helping popularize the Stanley cup/tumbler, as its President. Reilly hasn’t been able to right to ship thus far.
During Q3, HeyDude’s revenue fell by 17.4% to $204 million compared to management’s guidance for a 14% to 16% decline. On the other hand, Crocs’ revenue increased by 7.4%, while international Crocs revenue increased by 15.5%.
The contrast between the performance of these two brands has been very apparent since the acquisition in February 2022. That’s brought Crocs’ forward P/E down to a low 8.3x.
October 2024 Buys
New Positions: None
Increased Positions: e.l.f. (ELF), Zscaler (ZS)
October 2024 Sales
Exited Positions: None
Reduced Positions: None
Plan for November
Seasonality has all of a sudden turned very positive. November through April has historically been the best six month period of the year with an average return of 7.1%.
With the presidential election just hours away, I continue to expect and prepare for wild swings in the market. I believe that the bull market still has room to run and would like to exhaust my cash balance by the end of the year.
An area I would like to increase my exposure in is China. With Alibaba (BABA) as my only direct exposure to the world’s second-largest economy at an 8% allocation, I’m open to starting a position in the iShares China Large-Cap ETF (FXI) at a lower price. ELF, ZS, and BABA are also on my watchlist.
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