Q2-2024 Client Commentary

July 2, 2024

We are pleased to present your portfolio summary as of June 30, 2024. Your portfolio has demonstrated strong performance over the past six months, driven primarily by significant gains in your stock holdings and supplemented by more modest returns from your bond investments, which is in line with your asset allocation strategy. Our diligent pursuit of growth opportunities has helped enable you to capitalize on thriving sectors, particularly in data technology, beauty products, and innovative healthcare companies. Hence, yielding potentially substantial returns.

During a mixed quarter when the Dow Jones Industrial Average and MSCI EAFE international stock indices experienced declines, and while the S&P 500 and NASDAQ indices posted single-digit gains, your portfolio continued to benefit from our focused macroeconomic investment themes. Globally the stock markets exhibited divergent performance, with Value, Small Cap, and International stock indices showing modest year-to-date gains and negative returns for the quarter.

Despite daily market fluctuations, we believe that your willingness to endure moderate volatility is rewarded through our identification and retention of emerging leaders. These leaders are not only in technology but span various innovative and dynamic industries. Companies that become market leaders do so by expanding their reach and capabilities, rather than maintaining a low-cost, value oriented, cost cutting approach. Iconic market leaders achieve their status through growth and innovation, not by being undervalued relative to their artificially constructed peers.

Many wealth management firms attempt to mitigate market risks by over-diversifying portfolios, often including low-yield segments such as Value, Small Cap, and international stocks, and frequently rebalancing to underperforming strategies. To us, this approach is akin to being the crazy Swedish chef from the Jim Hanson Muppets era. By adding too many ingredients to a recipe (portfolio), hoping to improve the flavor but ultimately diluting the dish's essence into a strange mess. Similarly, abandoning emerging leaders prematurely in favor of underperforming strategies is more reliant on hope and simple mean reversion than on rigorous individual company analysis. In contrast, our investment strategy is rooted in identifying and nurturing potential market leaders, ensuring sustained growth and superior returns. If you have friends or family getting the Swedish chef treatment from their respective financial planners or advisors, please hastily introduce them to us.

Wishing you a pleasant summer. We remain vigilant and prepared to navigate the developments of these coming months.

Warm regards,

Opinions expressed are those of the author and are subject to change, are not intended to be a forecast of future events, a guarantee of future results, nor investment advice. References to other mutual funds should not be interpreted as an offer of these securities.

Earnings Growth is not a measure of a securities’ future performance.

It is not possible to invest directly in an index.

The Dow Jones Industrial Average (DJIA) is a stock market index that tracks 30 large, publicly-owned blue-chip companies trading on the New York Stock Exchange (NYSE) and Nasdaq.

The MSCI EAFE Index is a stock market index that measures the performance of large- and mid-cap companies across 21 developed markets countries around the world. Canada and the USA are not included. EAFE is an acronym that stands for Europe, Australasia, and the Far East.

The Standard and Poor's 500, or simply the S&P 500, is a stock market index tracking the stock performance of 500 of the largest companies listed on stock exchanges in the United States. The Nasdaq Stock Market is an American stock exchange based in New York City. It is the most active stock trading venue in the U.S. by volume and ranked second on the list of stock exchanges by market capitalization of shares traded, behind the New York Stock Exchange.