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- Internet and technology-oriented businesses continued their outperformance for the second quarter in 2023, while many of last year’s outperformers, like energy and utilities, struggled. The Federal Reserve may not yet be done tightening. However, with inflation receding even in a tight labor market, it seems to us that short-term interest rates are unlikely to go much higher.
- The Focus Growth Composite Portfolio (the “Portfolio”) trailed the Russell 1000 Growth Index and outperformed the S&P 500 Index in the second quarter. Year to date, the Portfolio trailed the Russell 1000 Growth Index and outpaced the S&P 500 Index.
- The second quarter’s top absolute contributors were Amazon, Netflix, and Microsoft. The top absolute detractors were Illumina, Thermo Fisher Scientific, and PayPal. On a relative basis, the top performers were Amazon, Netflix, and Adobe, and the leading detractors were NVIDIA, Illumina, and Thermo Fisher Scientific. We detail our current thoughts on artificial intelligence (AI) and “AI-Darling” NVIDIA further in this commentary.
- We initiated a position in Workday and added to our position in PayPal. We modestly trimmed our holdings in Microsoft, Salesforce, Autodesk, and Gartner to fund these purchases.
- We began 2023 expecting to see accelerating earnings growth for our Portfolio on a weighted average basis. Nearly halfway through the year, the Portfolio is on pace for better than 20% earnings per share growth in 2023, which is well above the Portfolio’s long-term, mid-teens average.