Our global fund underperformed its benchmark in September, but still leads it year-to-date.



Year to Date

Since Inception (Annualized)

Inception Date: 6/6/2009

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 inched higher in September, while its benchmark did quite a bit better. The fund’s underperformance for the month had a lot to do with its being underweight on energy, financials, and consumer staples. Year to date, and since inception, the Independence Fund is still beating the benchmark.

Among the best-performing stocks for the month were XPO Logistics (+11%) and Watsco (+9%). You can refresh yourself on the theses for XPO and Watcso if you need to; they’re fairly new to the fund. They have little to do with one another, except that both presented the kind of investing opportunity we look for: While we prefer inaction and patience, we spend each day preparing for opportunities in which prices veer far from intrinsic value. When that happened to XPO and Watsco, we upgraded our portfolio. We anticipate holding each stock for years, as both have an immense runway by way of consolidation of fragmented industries and secular tailwinds -- e-commerce package delivery in XPO’s case, and energy-efficient HVAC upgrades in Watsco’s. It’s heartening when newer investments lead the charge, because it reinforces our view that being patient buyers can pay off.

Our worst performers for the month were our pair of tower companies, American Tower (-7%) and SBA Communications (-6%). As our largest combined holding, the companies had a strong effect on our performance when they slid. They provide real estate for the erection of cell-phone towers to accommodate our growing mobile computing habits, and their contracted revenue growth and high incremental returns on capital make them attractive businesses. But their customer base is also very concentrated: The big four wireless telecom companies make up about 50% of site leasing revenue for American Tower and 75% for SBA. And when speculation rises that T-Mobile and Sprint will merge, the bears believe that the combined entity would decommission equipment on towers where the two are co-located and decrease tower revenue. Our research, however, suggests it isn’t quite that easy. Decommissioning equipment costs a few years’ worth of rent expense -- a meaningful up-front cash cost to perhaps save some dough down the line. Furthermore, data demands are growing so quickly that carriers would risk a bogged-down network. We therefore remain believers in our assessment of business quality and the long-term investing opportunity.

The Independence Fund had only one transaction during the month. We sold our entire stake in Natus Medical. The company dominates screening methods for newborn hearing, but Natus is a no-growth business at its core, subject to technological disruption. CEO Jim Hawkins, who built Natus from virtually nothing into the stout small-cap medical-device company it is today, has begun to focus on an acquisition strategy to make Natus larger. Hawkins is a proven CEO, and we believe smart M&A can create shareholder value, but Natus’ stock is already giving Hawkins credit for what he might be able to accomplish. We parted ways believing we find have better opportunities.

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