The stock market finished strong in 2016. Read on to learn how our funds fared at the end of the year.

Don’t call it a comeback. Domestic small-cap value stocks, as measured by the Russell 2000 Value Index, underperformed the Russell 2000 Growth Index in each of the three years leading up to 2016. Out-of-favor stock categories tend to stay out of favor for only so long before investors regain their interest and money comes flooding back in. Small-cap value came roaring back with a vengeance in 2016, with the Russell 2000 Value Index up 31.64%, compared with an 11.47% gain for the Russell 2000 Growth Index.  

Statistically speaking, our funds have consistently hung out on the growth side of the Morningstar style box. It’s not that we’re averse to paying the best price we can for a stock, but our focus lies on owning what we believe are high-quality business that can grow and compound value for shareholders over long periods of time.

Motley Fool Independence Fund

 

December

Since Inception (Annualized)

The Motley Fool Independence Fund (FOOLX)

0.75%

11.02%

FTSE Global All Cap Index

2.02%

10.58%

MSCI World Index

2.43%

11.14%

For a standardized list of performance for the Independence Fund, please click here. For fund holdings, please click here.

As is normal for the fund, we made very few trades during the month. After much discussion on the team, we exited our position in Chipotle. We believe that management did not adequately address the company’s operational issues over the past year. Factoring into our decision is that we already own similar consumer-facing companies such as Starbucks and Texas Roadhouse that are performing at a higher level. The only new position in the fund is Splunk, a midcap tech company that is a leader in the development of software that allows its customers to collect and analyze tremendous quantities of unstructured data.

The top three performing stocks for the month were Horizon Discovery (up 26.1%), Sberbank (up 15.2%), and NMC Health (up 13.7%). At the bottom of the performance ranking are Natus Medical (down 12.7%), Ultimate Software (down 11.0%), and Oaktree Capital Group (down 9.5%).

 

Motley Fool Great America Fund

 

December

Since Inception (Annualized)

The Motley Fool Great America Fund (TMFGX)

-0.10%

12.20%

Russell Midcap Index

1.14%

13.06%

Russell 2000 Index

2.79%

12.93%

For a standardized list of performance for the Great America Fund, please click here. For fund holdings, please click here.

The fund sold out of its position in Chipotle for the same reason as mentioned for the Independence Fund. We did not sell out of any other holdings during the month. The only new entrant to the fund was a medical-device company, ResMed, which is one of the industry leaders in developing continuous positive airway pressure (CPAP) machines for the treatment of sleep apnea.

Top-performing stocks were Ionis Pharmaceuticals (up 9.3%), Kapstone Paper and Packaging (up 8.4%), and Aceto (up 7.9%). On Dec. 23, the U.S. Food and Drug Administration approved Spinraza for the treatment of spinal muscular atrophy, the leading genetic cause of death in infants. This is a drug that Ionis developed and licensed to Biogen. Ionis will receive a tiered royalty of global sales up to a percentage in the mid-teens.

The three largest detractors from performance for the month were Wynn Resorts (down 15.2%), Natus Medical (down 12.7%), and Splunk (down 11.2%).

Motley Fool Epic Voyage Fund

 

December

Since Inception (Annualized)

The Motley Fool Epic Voyage Fund (TMFEX)

0.75%

3.71%

FTSE Global All Cap ex-US Index

2.02%

4.92%

FTSE Emerging Markets All Cap China A Inclusion Index

-0.08%

1.21%

Russell Global ex-US Index

2.49%

5.33%

For a standardized list of performance for the Epic Voyage Fund, please click here. For fund holdings, please click here.

During the month the fund sold out of Depa, a company based in the United Arab Emirates that provides customized furniture and interiors for hotels, villas, and cruise ships. After reviewing our list of holdings in the Middle East, we felt that we had plenty of exposure to economic growth in the region, and we decided to slightly scale back our investment in those countries with a sale of Depa. No new companies were added to the fund.

Top performers for the month were Sberbank (up 15.2%), NMC Health (up 13.7%), and DP World (up 12.8%). Laggards were Ctrip.com (down 11.6%), DuzonBizon (down 7.0%), and HDFC Bank (down 6.0%).

Kicking off 2017

Small-cap value was a great place to be last year, but what investment category will be the big winner in 2017? Emerging markets? Large-cap tech? Hatchimals? I’m skeptical of the last one but otherwise won’t venture a guess about which assets will be hot this year. We believe that we’ll have better performance over the long haul by sticking to our investment philosophy year in and year out. That’s not to say that this year won’t have some interesting things happen in the areas of domestic corporate tax rates, repatriation of foreign cash, and trade policy. As the situations evolve, we will evaluate their impact on our funds and individual companies and adjust as needed.

Thank you for your trust in us.

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