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 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|
|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.
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, Proofpoint, MyoKardia, Alexion and Abiomed. 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. 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
- 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
- Investments represent diverse market capitalizations, industries and trading strategies
- Provides meaningful deviation from major indices
- Strong preference for profitable companies with favorable valuation metrics (for example, reasonable P/E & P/B ratios), over against non-profitable growth names
- Strong preference for companies operating in sectors experiencing secular growth
- This preference does not preclude certain deep value opportunities in disfavored industries
 Total return over period is 104.7%, which would be around 114% but for these losses.
 Number of holdings has ranged from 19 to 22 since inception.