Our domestic fund beat its benchmark in August due to success in the technology sector.

 

August

Year to Date

Since Inception (Annualized)

Inception Date: 11/1/2010

Motley Fool Great America Fund (TMFGX)

0.92%

10.75%

12.62%

Russell 2500 Growth Index*

(0.05%)

12.19%

13.49%

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

The Great America fund outperformed for the month, with a 0.92% gain, compared with a slight 0.05% decline for the Russell 2500 Growth Index. Year to date, the fund’s 10.75% return trails the benchmark’s 12.19%. We can’t make promises about how the rest of 2017 will shake out, but so far it’s been a good year for domestic small- and mid-cap stocks.

Technology stocks led the way for the fund in August, with GrubHub and Splunk performing particularly well – up 23.8% and 11.8%, respectively – after positive Q2 earnings reports. GrubHub is an online food ordering and delivery company that has two-sided network effects, in that diners benefit when more restaurants join the platform, and vice versa. There is abundant academic literature detailing the competitive advantages of strong network effects, and we note that GrubHub’s management takes care to highlight that it’s focused on nurturing both sides of the network.

Our three worst-performing stocks in August were Sabre (down 19.5%), Under Armour (down 16.6%), and American Woodmark (down 15.6%). All three sold off after reporting disappointing Q2 earnings results. Sabre and Under Armour both announced business restructuring initiatives to cut costs as a reaction to challenging sales environments.

In August, we exited our positions in Sabre and Spirit Airlines and trimmed our stakes in Tractor Supply and Tri Pointe Group. We used the proceeds from these sales to add to existing positions in Fastenal, GrubHub, and Jones Lang LaSalle.

We ended August with a cash position of approximately 5% of our assets under management. We prefer to be fully invested and consider full investment to be a cash position closer to 2%. To that end, we’re on the hunt for some new ideas that we can ideally hold for at least three to five years. We can promise you, though, that we’ll be patient in waiting for good ideas, and we won’t make purchases solely for the aim of allocating our cash.

* The Great America Fund changed its benchmark from the Russell MidCap Index and the Russell 2000 Index to the Russell 2500 Growth Index on Feb. 28, 2017.

 

Lastest Insights