Updating the IPO Candy Folio

Whirly lollipop on orange background.

It’s been a volatile August and the world continues to change, sometimes it feels like it’s doing so at a faster pace!

That means it’s a good time to update the IPO Candy Folio which to remind you is long only so we are limited in terms of how defensive we can be there. (We’re a little more aggressive and hedged in our SoundView TechFund.) FWIW on a one-year basis the IPO Candy Folio has been outperforming the Russell 2000 by 15 to 20%. It’s up 15% on a one-year basis versus the R2000 which is down over the same period. We may be focusing more on this “fund” in 2016 if it continues to outperform.IPOC_Folio_Return_Sept_2_2015

There’s a theme to our changes here. We are eliminating a few names like LNKD (no edge), YDLE (acquired for a nice premium) and MCRN (don’t want to own a manufacturing equipment company right now.)

The additions are largely based on some of our recent work and also thematically aligned with a more domestically tilted portfolio – these are US consumer firms that are gaining share, less exposed to global business cycles and undervalued based on our own IV analysis.  Here is the list with links to more information.

Malibu Boats (MBUU) – We’re a little worried about risk in some of the states tied to energy and higher interest rates but this company has great products, very high margins, is gaining share and is quite innovative. I’m not going to call it the “Tesla of boats” but it’s pretty nifty. See our post for more: Malibu Boats Stock Looks Cheap

Planet Fitness (PLNT) – Yes we worry about competition but the trends are in favor of this name. Their franchise model also translates into high profitability which is not fully appreciated by “the Street” at this point. High margins and solid growth will mean a better multiple. For more and our IV model see our recent post: Can Planet Fitness Succeed?

Amplify Snacks (BETR) – Healthier, better-tasting salted snacks. What could be better? We just published on this one. It’s a little controversial but if management can continue to execute this one will move much higher and/or be acquired. Here’s the story: The Skinny on Amplify Snack Brands.

While doing this we also raised a bit more cash – going from 17% to 22% now. There are at least two more names we are eyeing for near-term addition and might like to increase some weights if the market continues to decline.

Finally we’ll leave you with a quote from a short but interesting article from Justin Fox on Bloomberg which talks about how the economy may be changing. I like it and think it’s probably accurate:

“Finally, consider the things that people do want to spend their money on. The defining consumer product of our age is the smartphone. A smartphone is a good, and it takes resources to make and transport it. Still, it takes a lot less resources than, say, a car. Most of its value is in the software that is loaded onto it and the people, information and entertainment you can connect to with it. That’s a different sort of value creation than 20th-century resource-based value creation. If that’s the direction the global economy is headed in, the connections between growth, trade and resource consumption aren’t going to be the same as they have been. That is probably a good thing.”

In looking at investments we know it has to be about IV and the business model but making sure that the success of these companies is anchored in durable, long-term trends is the key to enjoying real wealth creation.

 

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