In 2020, Eight Ventures Private Wealth Management launched the Smart Whales model, a proprietary investment model featuring an all-stock portfolio. Developed and managed by Eight Ventures, the Smart Whales model has returned 22.5%/year, inception[1] through 7/31/2023.
Smart Whales: Performance
The chart below details what $1 invested in Smart Whales on 2/18/2020 was worth after the close of trading on 7/31/2023. The chart also includes key comps that largely cover the waterfront.
| Model / Index | Annualized Performance
(2/18/20 – 7/31/23) |
Total Return over Period | $100 Now Equals |
| Smart Whales Model | 22.5% | 104.7% | $205 |
| S&P500 | 11.1% | 43.8% | $144 |
| Nasdaq-100 | 16% | 67.1% | $167 |
| Russell 2000 (small cap) | 7.9% | 30% | $130 |
| XLE (energy sector) | 20.8% | 92.1% | $192 |
| ARKK Innovation Fund | -3.9% | -12.9% | $87 |
For those unfamiliar with the data comparing investor returns to those of the broader market, it can be summarized like this: the market beats the majority of active funds and trounces most retail investors. This underperformance is detailed in DALBAR’s Quantitative Analysis of Investor Behavior report.[2]
Smart Whales: Management Commentary
Year-to-date through July, Smart Whales returned 36.9%. We have used this run up to take some winnings off of the table. For example, we exited Uber, a company that moved into strong profitability to propel solid gains, and we slightly trimmed other tech names with strong gains to redeploy capital in new names.
Despite our buy-and-hold orientation that would be pleased to own names 5-10 years, or even forever, over these three-and-a-half years, Smart Whales has entered and exited several names with nice profits. These include diverse companies such as Wells Fargo, SPSC Commerce and Builders FirstSource, one I wish we still owned.
In review, Smart Whales has been good-night-in-Vegas good at having a chip on innovative companies that were bought out, typically at steep premiums. Since inception, we’ve had nine companies bought out, including SailPoint,[3] Proofpoint,[4] MyoKardia,[5] Alexion[6] and Abiomed.[7] We owned all nine before the takeovers were announced, which made for about nine good Monday mornings.
On the downside, our worst missteps were have having a toe in biotech names that relied more on hopes and dreams than near-term profitability. Three investments there cost us just over nine points of total return since inception.[8] At one point in time, we were up four-fold in a biotech that self-destructed over a poor clinical trial, leaving us with losses and regrets, and leaving me with a dimmer view of small one-trick biotechs.
Smart Whales: At A Glance
Buy-and-hold US equities orientation
- Strong concentration in a relatively small number of holdings[9]
- Features U.S. and International investments – universal focus provides wider range of opportunities through market cycles
Diverse Investment Strategies
- Growth – Strong revenue growth, signaling “better mousetrap”
- Income – Strong payouts often indicate mature operations with stable cash flows, and can signal durable competitive advantage and wide moat
- Deep value – Valuation metrics indicate strong cash flow relative to investment
Noncorrelation
- Investments represent diverse market capitalizations, industries and trading strategies
- Provides meaningful deviation from major indices
Profitability
- Strong preference for profitable companies with favorable valuation metrics (for example, reasonable P/E & P/B ratios), over against non-profitable growth names
Secular Growth
- Strong preference for companies operating in sectors experiencing secular growth
- This preference does not preclude certain deep value opportunities in disfavored industries
[1] 2/18/2020
[2] https://www.ifa.com/articles/dalbar_2016_qaib_investors_still_their_worst_enemy
[3] https://www.sailpoint.com/press-releases/thoma-bravo-completes-acquisition-of-sailpoint/
[4] https://www.proofpoint.com/us/newsroom/press-releases/proofpoint-enters-definitive-agreement-be-acquired-thoma-bravo-123-billion
[5] https://news.bms.com/news/details/2020/Bristol-Myers-Squibb-Completes-Acquisition-of-MyoKardia-Strengthening-Companys-Leading-Cardiovascular-Franchise/default.aspx
[6] https://www.astrazeneca.com/media-centre/press-releases/2021/acquisition-of-alexion-completed.html#
[7] https://www.abiomed.com/about-us/news-and-media/press-releases/johnson-and-johnson-completes-acquisition-of-abiomed
[8] Total return over period is 104.7%, which would be around 114% but for these losses.
[9] Number of holdings has ranged from 19 to 22 since inception.
Recent Comments