Our global fund surged in April on the strength of our international holdings.



Year to Date

Since Inception - June 6, 2009 (Annualized) 

Motley Fool Independence Fund (FOOLX)




FTSE Global All Cap Index




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

The Independence Fund outperformed its benchmark in April and is beating it both year to date and since inception. So far this year, the businesses you own through investment in the fund are performing well, and the stocks of those businesses are performing even better.

At a portfolio level, we continue to improve the average quality, growth, and return potential of our businesses, even though finding opportunities to do so is challenging. Our efforts to do so have narrowed the holdings of the fund and, we believe, have contributed to the strong performance. The other major contributing factor to April’s spring forward was the fund’s choice to hold considerable businesses domiciled outside the United States.

We eliminated four positions during the month. We had purchased American Woodmark, a U.S. cabinet maker with a strong culture, in the wake of the housing crisis several years ago. We admired how the company maintained its domestic manufacturing assets through the tough times, doubled down on strengthening relationships with customers, and relentlessly invested in product development. We believed Woodmark would be quicker than its competitors to thrive when the housing market recovered. That turned out to be right, and during the housing recovery, Woodmark took share from its competitors and was a nice winner for us. Our thesis has played out, and with competitors desperately trying to claw back that lost market share, we think your capital is better deployed elsewhere.

The stories behind our other sells are less exciting. Syngenta is a fertilizer and chemicals company that’s being acquired by a large Chinese company. The buyer liked what we liked about Syngenta and made an offer. We sold Depa, a Middle Eastern construction-related firm, because we own stronger Middle Eastern businesses with a greater control of their own destiny. It makes more sense to us to underwrite high-conviction investments than seek a modest diversification benefit.

Finally, we sold Baidu, the Chinese internet-search giant. Baidu was a successful investment for us, but the company's management is making massive investments that we believe are a poor use of shareholder funds. The poor capital allocation is crushing current business economics and has left Baidu with an unclear advantage (at best) relative to its entrenched competitors. We believe its current direction has a low chance of paying off.

We replaced those four holdings with two new positions. First is MercadoLibre, which is a monster of a business that owns and operates the leading e-commerce platform in Latin America. It’s a full-service platform with leading capabilities in transactions, payments, shipping, and advertising. Management deserves a ton of credit for building the business in anticipation of increasing internet connectivity and rising incomes in its home markets. This is a highly advantaged business with strong tailwinds that we hope to own for a long time.

Our second purchase was Watsco, a hidden gem located in southern Florida. It’s an unassuming distributor of heating and air conditioning supplies to contractors and repair people. But it’s also a special company.

Watsco is many times larger than its nearest competitor, which gives it advantaged sourcing for the thousands of parts it stocks. Scale has also allowed it to invest millions in technology development to help contractors more easily find and order parts, install replacement units, and manage their business. And technology is improving how Watsco runs its warehouses, manages labor and inventory, and markets products. Smaller competitors can’t afford these investments, and we believe Watsco is widening its advantage accordingly. The company is founder-led and encourages employee loyalty and an ownership mentality with a unique incentive program. Watsco checks all our boxes: a quality business, a clear path for profitable growth, and a reasonable price.

Once again, returns were driven by our foreign holdings. Seven of the top 10 performers were foreign companies, with zooplus leading the way (+27%). Headquartered in Germany, zooplus is an online retailer of pet food and supplies. Pet food, as you might guess, is a recurring purchase but annoying to lug back home from the local grocery store. Therefore, zooplus sells convenience and has very loyal customers willing to tack on other items to each order and keep their pets happy.

The worst-performing stock in April was Natus Medical (-11%). The company released first-quarter earnings that showed profitability weakness in its core business of newborn health screening, while management lowered its earnings outlook. Our take is that Natus is run by a management team that understands that its mature core business is a cash cow that should be managed to fuel acquisition-led growth. Quarterly variability is OK, but we’ll monitor the core business and make sure the engine that drives the reinvestment capabilities is as healthy as it needs to be.


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