Back to Large Cap

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For the month of December, Northlake’s Market Cap model shifted back to large cap. As a result, client positions dedicated to the Market Cap model sold their holdings in the S&P 400 Mid Cap (MDY) and reinvested the proceeds in to the S&P 500 (SPY). The Style model continues to favor value, so client positions in the Russell 1000 Value (IWD) will be held at least another month.
This marks the third month in the last four that large cap has been favored by the Market Cap model. November saw a one month stay at Mid Cap. As a reminder, when the models are in transition, there is often more volatility in the monthly signals. When the model shifted to large cap in September, it was the first time in that mode since December 2009 and only the third time since the end of 2007.
After such a long run favoring small and mid caps, the model does seem to be suggesting that the run for higher risk, smaller market cap companies could be coming to an end. This makes sense given a long period of sub par but positive economic growth, interest rates that can’t go any lower, and general aversion to risk by investors given the ongoing worries about global economic growth prospects. Time will tell if the shift to large caps is the start of a new major trend. In the meantime, with the fiscal cliff approaching and the politicians still bickering, I like the idea of spending the last month of the year in the lower risk large cap index.
November’s one month stay at mid cap was profitable by a little less than 1% but added minimal value compared to the S&P 500 and Russell 2000, which were also up a little less than 1%. In the Style model, the value signal was inaccurate in November as IWD was declined very slightly for the month, while the Russell 1000 Growth (IWF) rose 1.75%. Despite the miss in November, the value signal has been a good one since it first appeared for August 2012. Since then, IWD is up 4% vs. a gain of 2.75% for IWF. November’s performance reflected a bounce back in large cap tech stocks, which led the market lower during the October/November correction.
Disclosure: SPY and IWD are widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole propreitor of Northlake, a registered investment advisor. Filings can be found at www.sec.gov.

Qualcomm Story Kicking In Big Time

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Qualcomm (QCOM) bucked the trend of negative earnings and lowered guidance that has been prevalent in technology stocks this quarter. The company reported a good old fashioned “beat and raise” quarter. The shares are responding very well, up 4% in a down market.
I like QCOM because it is the Intel of smartphones. Much as Intel chips powered the PC revolution of the 1990s, QCOM chips and technology is powering the smartphone revolution of today. In its most recent quarter, QCOM saw better than expected demand and profit margins as it appears to have overcome supply constraints first encountered earlier this year. Even more bullish, the company forecast much better than expected demand for the December quarter and fiscal year 2013. Guidance for those periods is way ahead of analyst expectations.
For some time, I have been waiting for the proverbial tipping point when smartphone sales would trigger a breakout in QCOM’s financial results. It appears the breakout is finally happening. The elimination of supply constraints is coinciding with surging smartphone demand at the high end (new phones from Apple and Samsung) and low end (cheaper smartphones enabling emerging market subscribers to finally upgrade). This tipping point is occurring when investors are nervous, so the positive flow through to the shares is more pronounced.
The multiyear outlook for smartphone demand is excellent. Global subscribers with smartphones should more than double in the next several years. QCOM has a long runway of growth ahead. A move in the shares to $75-80 in 2013 is well within the realm of possibility.
Qualcomm is widely held by Northlake Capital Management LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a long only registered investment adviser. Qualcomm is a net long position in the Entermedia Funds. Entermedia is a long/short equity hedge fund focused on media, entertainment, leisure, communications and related technologies. Steve Birenberg is co-portfolio manager of Entermedia, owns a stake in the funds’ investment management company and has personal monies invested in the funds

Mixed Media Earnings Better Than Stock Reactions

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Most major media companies reported earnings this week including those in Northlake’s portfolio of individual stocks. As has been the case with the broader market, earnings reports and guidance from Northlake’s portfolio was mixed. CBS was the clear winner with a solid quarter amid tough circumstances and a confident outlook for the December quarter and 2013. Liberty Global was as expected although the market greeted the results with a sell-off in the shares. Charter Communications and Discovery Communications were a little light on reported numbers and guidance but a lot of the issues were one-time or unsurprising. Liberty Media is an asset value play where earnings mean little.
Here’s a closer look at the results for each company with some thoughts about where the stocks go from here.
CBS reported a slightly disappointing 2% rise in revenue but this was more than offset by a better than expected 7% increase in operating cash flow. Margins expanded again, a hallmark of CBS financial performance the last few years. The biggest takeaway though is the confidence management showed in future performance despite poor ratings so far this fall at the CBS Network. I think the long-term setup remain good and the shares can reach the low $40s but not until confidence in the economic outlook returns and ratings improve.
Liberty Global began to show the acceleration in revenue and cash flow that was predicted by rapid growth in subscribers over the past year. Honestly, I am not sure why the stock sold off 5% on this news. This acceleration is just beginning and 2013 is set up well. Another positive is that the company promised to pick up the pace of its share buyback in the fourth quarter. It seems farfetched but I can easily compile a target for LBTYK shares north of $100 in a few years given the pickup in growth, massive free cash flow that will follow as the cost of obtaining the new subscribers subsides, and the company continues to very aggressively buyback shares.
Charter Communications shares have been selling off for a few weeks as the company has announced its intention to accelerate capital investment and promotions in order to gain new subscribers. Charter has a real opportunity given that its penetration of homes passed severely trials its cable company peers. The new management team at Charter has instituted this strategy successfully before. The story is not unlike Liberty Global – subs first, financial payoff later – and the upside is similar. Charter is a few years behind, however. I think the shares may have a hard time regaining lost ground in the near-term but valuation at current levels provides support. Charter is on the watch list.
Discovery Communications reported a little worse than expected results for revenue and EPS but better than expected gains in operating income. This set up often suggests one-time items and that was the case. Advertising growth of 8% was a good print given Olympic competition. Guidance was the biggest issue for the stock, which sold off several percent on the report. Management forecast December quarter ad growth of 8%, no sequential improvement despite extremely strong ratings and positive seasonality. Discovery remains superbly positioned given its strong ratings, emerging networks (OWN and ID), and especially the growth opportunities abroad for its low cost, non-fiction programing. Discovery remains one of the few real growth stories in media.
Liberty Media is a collection of assets dominated by a t 49% stake in Sirius XM Satellite Radio. The second largest asset is the Starz Encore suite of pay TV channels. Liberty trades at 20% discount to the value of its assets. Those assets also have excellent growth prospects. This quarter management did indicate that Starz, due to be spun off before year end, would have a little less growth in 2013 as contracts with cable and satellite companies are renegotiated. The bigger question though is how the company will close the discount to its asset value while monetizing a portion of its ownership in Sirius. The conference call offered little fresh insight. John Malone, Liberty’s controlling shareholder, has a superb track record of realizing value form his investments. In Malone we trust. I see the shares between $130 and $150 in 2013 as long as business trends at Sirius remain firm. Fortunately, Sirius has been steadily adding more subscribers than expected in 2012, setting 2013 up favorably.
CBS, Charter Communications, Discovery Communications, Liberty Global, and Liberty Media are widely held by Northlake Capital Management LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a long only registered investment adviser. CBS, Charter Communications, Discovery Communications, Liberty Global, and Liberty Media are net long positions in the Entermedia Funds. Entermedia is a long/short equity hedge fund focused on media, entertainment, leisure, communications and related technologies. Steve Birenberg is co-portfolio manager of Entermedia, owns a stake in the funds’ investment management company and has personal monies invested in the funds

Back to Mid Cap…But Will It Last?

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After spending two months at large cap, Northlake’s Market Cap model shifted to mid cap for November. There were no significant changes in the underlying factors in the models. Rather, there was just movement within each model that led to a small change in the overall model reading. Since the large cap signal was not a strong one, the small changes due to fresh data from a month of economic reports and stock market trading was enough to change the signal to mid cap.
As I have explained in the past, volatility in the model signals often picks up when a larger trend is underway. I think a larger trend favoring large caps might be coming after a run of almost twelve years for small and mid cap since the dotcom bubble burst. The idea behind this switch is that the sluggish, post financial crisis, global economy is easier to navigate for larger companies. In addition, investors would gravitate to the perceived safety, stability, and predictability of larger companies. It is not yet clear that a major large cap trend is underway but conceptually, it makes a lot of sense.
The Style model was unchanged, registering its fourth consecutive month at value. The value signal got a little stronger this month as recent dollar strength favors value. Growth stocks tend to have more international exposure and do better when the dollar is weak.
As a result of this month’s signals, client positions in the S&P 500 (SPY) were sold with the proceeds reinvested into the S&P 400 Mid Cap (MDY). The prior large cap signal was not a difference maker as for the two month period it was in place the S&P 500, S&P 400, and Russell 2000 each less than 1%. The relatively new value signal is performing well, with the Russell 1000 Value (IWD) up over 4% versus a gain of over 1% for the Russell 1000 Growth (IWF) since the value signal was triggered at the start of August.
Disclosure: IWD and MDY are widely held by clients of Northlake Capital Management, including in Steve Birenberg’s personal accounts. SPY is held in selected Northlake-managed accounts. Steve Birenberg is sole proprietor of Northlake, a registered investment advisor. Regulatory filings can be found at www.sec.gov.

Mixed Bag of Apples

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Apple reported decent September quarter results against low expectations following lots of worry about demand trends and recent data that revealed iPad sales would be below expectations. Revenues of $36 billion were up 12% year over year and in line with consensus forecasts. EPS of $8.67 rose 23% vs. a year ago but slightly missed consensus estimate of $8.81. EPS would have been about 20 cents higher except for an unexpected and unusual negative swing in other expense related to foreign exchange hedging that should reverse next quarter.
At the product level, Mac sales of 4.9 million units were right on target. iPhone sales of 26.9 million units were ahead of expectations indicating that demand remained reasonable for the 4S even ahead of the launch of iPhone5. iPads came in at a disappointing 14 million units. An iPad shortfall was expected after Apple announced that it had sold its 100 millionth iPad earlier this week. iPad inventories were unchanged and management indicated that it saw a slowdown in demand in August and September as rumors mounted about the iPad mini. iPods, no long an important product at just 2% of revenue, were slightly below estimates at 5.3 million units.
Overall, the quarter was solid against low expectations by Apple standards. The much bigger news concerned guidance for the September quarter. Management forecast revenue of $52 billion and EPS of $11.75 against consensus estimates of $55 billion and $15.50. By Apple standards, the revenue guide was actually pretty good. However, EPS are way below estimates even by Apple’s usual conservative standard. The issue is gross margins, which Apple forecast at 36% against 40% in the September quarter.
Gross margins have not been below 40% since the December quarter of 2010 and have averaged 42.1% in the past eight quarters. Management noted that newly introduced products would make up over 80% of December quarter sales and that costs are highest in the first quarter a product is introduced before economies of scale kick in. This is a legitimate point although it has not been as obvious of an issue in past quarters with heavy new products flow.
Apple shares are barely changed following the report after a 15% pullback over the past month. I think there are several takeaways from the quarter. First, the stock price action indicates that the stock already reflects the lower expectations. At $610, the shares seem to have discounted the weak EPS guidance. Second, I think we should start to accept that Tim Cook provides realistic guidance. Most of the quarters since he took over have been closer to company guidance than to analyst estimates. Analysts have been trained to view Apple guidance as extremely conservative. Maybe that is changing under Cook’s leadership. Whether this is because Apple’s financial momentum is waning is a key question.
Most importantly to me, Apple may have finally reset growth expectations (or the market have reset growth expectations for Apple). Trailing twelve month earnings growth over the past eight quarters has varied from 60% to 96%. If guidance proves correct, earnings growth in calendar 2012 will be just 20%. For a long time, Apple shares have traded at what seems like a very low P-E multiple relative to the growth rate of its earnings and to its product and market share momentum. This is because investors had long anticipated that the growth rate would slow if for no other reason than the law of large numbers. Apple sold 37 million iPhones in the December quarter a year ago. The guidance implies around 46 million this year. To sustain 20% growth means next year they must sell 55 million. At some point, the end market and Apple’s market becomes mature.
Investors are smart and realized this was coming and kept Apple’s valuation in check. Current controversy over iPad demand and corporate gross margins is likely to be what determines whether Apple shares get their upside mojo back. Management discussed the huge opportunity for iPads against 300 million PCs still sold each year (Apple has sold 100 million iPads in 18 months). iPhones still have growth as smartphone penetration continues to grow on a global basis but the sheer size of iPhone revenue ($29 billion in the most recent quarter representing 55% of sales) means that iPads have to pick up the slack. Broadening the product line with iPad mini makes sense in this regard.
Gross margins also have to firm up. Another key question is whether Apple has to accept lower margins to drive product sales. Maybe the competition is catching up? This is a fair interpretation of the guidance. Management indicated that margins should rise as production ramps and products mature. Apple does usually guide gross margins conservatively. If that proves to be the case this quarter then investors will be comfortable in the company’s competitive position and the likelihood that future growth is sustained at 20% or even re-accelerates.
I believe that the combination of recent worries, the reported guidance, the acknowledgment of the slowing growth rate, and the 15% pullback in the shares have effectively reset the investment case for Apple. Backing out cash, the shares trade for less than 10 times forward earnings. Against 20% growth in FY13, this is a very reasonable valuation with much lower expectations on the part of investors.
A new catalyst will have to emerge to get the shares back on track. Signals of strong demand this holiday season and easing of supply constraints are the most likely until the company reports earnings again in January. I think both of those things will occur. If they do, then it will be clear that guidance is going to be comfortably exceeded. This is the bull case for the near-term. It is also the case I believe will occur. And never forget that as the largest market cap stock on the planet, Apple shares are going to be heavily influenced by sentiment and direction of the overall market.
Apple is widely held by Northlake Capital Management LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a long only registered investment adviser. Apple is a net long position in the Entermedia Funds. Entermedia is a long/short equity hedge fund focused on media, entertainment, leisure, communications and related technologies. Steve Birenberg is co-portfolio manager of Entermedia, owns a stake in the funds’ investment management company and has personal monies invested in the funds.

EMC Misses But Remains Well Positioned

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EMC reported results that were slightly below Wall Street expectations and management’s prior guidance. In addition, management lowered full year guidance. Interestingly, the stock is down barely over 1% today, a good performance given the huge drops at other tech companies after reporting earnings. Many stocks that have yet to report dropped a lot more than EMC in anticipation of poor reports and weak guidance.
I think EMC is taking the quarter reasonably well because it is quite clear that the primary problem the company is facing is a weak IT spending environment at major enterprises. EMC’s results and guidance indicate that it is growing faster than other major IT suppliers as its focus on big data, cloud computing, flash solutions, and virtualization provides insulation against weak spending in more mature, legacy technologies. Storage and virtualization are gaining share and sit in the sweet spot of the major trends in enterprise computing.
Given EMC’s excellent positioning in growth markets and a strong product cycle across most its storage solutions, I think it will pay to ride out the near-term weakness in stock. Should spending patterns actually improve or Wall Street begin to anticipate better IT spending, EMC shares are likely to reassert their leadership role we saw earlier in 2012.
Catching the timing of these sort of changes is difficult. In the meantime, EMC’s strong execution and attractive end markets should prove defensive if the market or technology environment worsens. On the other hand, a lesson learned here is not to be greedy when the stock rallies again as even the best positioned companies face cyclical risks in the highly competitive and mature enterprise technology market. I am highly confident Northlake will get a chance to sell EMC at 2012 highs around $30, good for a 25% gain against today’s prices.
EMC is widely held by clients of Northlake Capital Management, LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a registered investment advisor. Northlake regulatory filings can be found at www.sec.gov.

Just When It Looked in the Clear, Google Misses

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Google’s results and the negative stock price action are a good chance for me to reflect. In my Entermedia hedge fund, Google is the second largest long position. At Northlake, my long only registered investment advisor, Google is widely owned but a slightly below average position. As a generally long-term investor, my initial thought is today’s results are not a game changer. However, I can’t ignore the short-term either and that could be a little rough.
Standalone Google results were worse than expected. It’s not an excuse but it is worth remembering that Google provides minimal guidance. Let’s look at the estimates and reported figures for this quarter in the core Google (ex-Motorola). Google sites revenue was $7.73 billion vs. a consensus of $8.12, about a 5% miss but up 15% vs. a year ago. Google networks revenue was $3.13 billion vs. an estimate of $3.09 billion, about 1% ahead of expectations and up 21% vs. last year. Sites grew 2% sequentially with network up 5% sequentially. Google indicated that foreign exchange cost the company several hundred million dollars, a figure that is hard to compare to street estimates and hard for the street to calculate. Operating margins at the core were about 36%, approximately 1% less than expected and down 1% from a year ago. Paid clicks (volume of searches) rose 33% against an expectation of 34%. Cost per click (price of an ad) fell 15% against an estimate of down 11.3%. Clearly, there was an overall miss vs. Street expectations. Given that Google does not provide specific guidance, however, the miss seems within the margin of error. And not to be lost is the growth rate of the core business is still almost 20%.
One takeaway is that that Google’s lack of guidance results in more volatility of reported results relative to estimates than for most companies. More quarters than not over the last few years, analysts have been too optimistic. However, that does not mean that Google does not maintain a superior growth and investment profile for the long-term.
As noted, core growth this quarter was just under 20% and showed mid-single digit sequential growth. This is for a company that just reported almost $9 billion in quarterly net revenue, a $36 billion annual run rate. How many really large companies can grow anywhere near this rate? Google’s core search product is also being used more and more — paid clicks up 33%. Sure, the transition to mobile means the cost per click or price of an ad is falling. Yet, it still nets out to stellar growth.
By any measure, Google appears to be gaining share and maintaining a very strong competitive position. It’s a position that is hard to attack. In mobile, you can argue that Google search is the only player. iOS and Android devices default to Google search. Bing and Yahoo are nowhere to be found in mobile.
Of course, momentum and short-term results matter on Wall Street. This quarter’s negative surprise, even if only modestly negative, is going to break the momentum the shares had finally gathered after a rough few years. Sentiment that had been improving is going to sour.
I suspect I’ll be looking to add to Google over the next days and weeks but it may be at lower prices than $687 (-9%) where it was halted after the earnings were accidentally released early. If the game hasn’t changed, Google can double its earnings in about four years. It seems to me that should lead to a much higher stock price eventually. How many large cap companies do you own or follow with that type of potential and with what appears to a very strong competitive position?
Google is widely held by clients of Northlake Capital Management, LLC, including in Steve’s personal accounts. Steve is sole proprietor of Northlake, a registered investment advisor. Regulatory filings can be found at www.sec.gov.Google and Yahoo are net long positions in the Entermedia Funds. Entermedia is a long/short equity hedge fund focused on media, entertainment, leisure, communications, and related technologies. Steve is co-portfolio manager of Entermedia, owns a stake in Entermedia’s investment management company, and has personal monies invested in the funds.

Large Cap and Value Still Favored for October

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There were no changes to the signals from Northlake’s Market Cap and Style models for October. The new large cap signal remains in place for a second month and the value signal is now entering its fourth month. With no changes for October, clients will continue to own the S&P 500 (SPY) representing large cap and the Russell 1000 Value (IWD) representing value.
The underlying indicators in the Market Cap model shifted in favor of small caps based on the latest data but not far enough to change the signal. However, another similar month in October would move the model back to mid cap territory. The main shift in favor of small cap occurred in the trend indicators which picked up a better month for small and mid caps during September’s market rally.
A similar situation exists in the Style model. There was a shift toward growth from value but not enough to cause the overall model to change for October. Once again, if the model were unchanged in in October, the following month would see a change. In the Style model, the U.S. dollar indicator moved from value to growth reflecting the weak performance of the dollar in September a the Euroe rallied strongly.
Overall, the models indicate that the economy is growing slowly and the market is trending consistently with a high degree of correlation among various market themes. This type of environment often sees more volatility in the model signals as has been the cause in recent months.
During October, the shift form mid cap to large cap worked well. Mid cap, as represented by the S&P 400 Mid Cap (MDY) rose just 1.9% while the S&P 500 (SPY) gained 2.3%. The Style model also had a good month with Value gaining 2.5% against just 1.1% for Growth. For all of 2012, the Market Cap model has struggled and lags the benchmark S&P 500, while the Style model is beating the market. The Market Cap model has struggled with an environment that historically has favored small caps while investors focused on large caps instead. I think the many risks apparent in the investment landscape have bullish investors looking at presumably safer large companies.
Disclosure: IWD and SPY are widely held by clients of Northlake Capital Management, including in Steve Birenberg’s personal accounts. MDY is held in selected Northlake-managed accounts. Steve Birenberg is sole proprietor of Northlake, a registered investment advisor. Regulatory filings can be found at www.sec.gov.

Trimming CBS at Initial Price Target

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CBS has been a huge winner for Northlake clients. Initially purchased in the summer of 2009 near $6, the stock has soared thanks to great ratings at its CBS and Showtime networks, excellent cost management, and aggressive share buybacks and dividend increases. The addition of retransmission fees paid to CBS by cable and satellite companies has added a growing and predictable high margin revenue stream that makes CBS look a lot more like the other big entertainment companies that historically have traded at a higher valuation. CBS is now less cyclical, less reliant on advertising, and more diversified. The result of fantastic operating trends, superior capital allocation, and a faster growing, more stable business model has been an expanding valuation on rapidly rising earnings and cash flow. It all adds up to the shares rising from $6 to $36.
Long ago, I set a mid-$30s price target on CBS in a best case scenario. I set price targets on every stock I buy for Northlake portfolios. As part of Northlake’s disciplined investment strategy, I trim positions when price targets are reached. This was the case with CBS, which I trimmed yesterday at $36.70. Fundamentals at CBS are clearly better today than when I set the mid-$30s price target. My latest analysis suggests the stock can reach the mid-$40s if the company meets expectations over the next year. Nevertheless, disciplined portfolio management trumps rising price targets and cutting back the CBS position from an overweighted to a normal weighted position is the prudent decision.
Looking ahead, the primary risks to CBS are weaker advertising markets related to slowing economic growth and declining prime time ratings at the CBS network. I don’t currently expect either of those risk to emerge. However, at $36, the risks are higher, and the risk-reward trade-off in the shares in less attractive. Upside to the mid-$40s still merits an investment in CBS, just at a lower level than previously.
Disclosure: CBS is widely held by Northlake Capital Management LLC, including in Steve Birenberg’s personal accounts. Steve is sole proprietor of Northlake, a long only registered investment adviser. Northlake regulatory filings can be found at www.sec.gov. CBS is a net long position in the Entermedia Funds. Entermedia is a long/short equity hedge fund focused on media, entertainment, leisure, communications and related technologies. Steve Birenberg is co-portfolio manager of Entermedia, owns a stake in the funds’ investment management company and has personal monies invested in the funds.

Large Cap Favored for First Time Since 2009

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After five months favoring Mid Cap, Northlake’s Market Cap model switched to a Large Cap signal for September. As a result of the switch, client positions in the S&P 400 Mid Cap (MDY) have been sold and the proceeds reinvested into the S&P 500 (SPY). The Style model is recommending Value for the second consecutive month. All Northlake client positions in the Russell 1000 Value (IWD) will be maintained. This is the first time the Market Cap model has recommended large cap since 2009.
The shift to large cap has been underway over the past few months as the economy has cooled and investors have been looking to reduce risk. Small cap stocks lagged the summer rally, shifting the technical trend indicators in the model to large cap. Rising interest rates, albeit still at extremely low levels, was the tipping point that led to the switch to large cap. Rates are up modestly since the European Central Bank indicated it would aggressively buy European sovereign debt to ease the funding crisis in Spain and Italy. Rising interest rates hurt small companies more than large companies as multinational corporations generally have easier access to credit.
The latest monthly signal is pretty firmly into large cap territory so I expect this change to hold for a while. Given the fragile nature of the global economy, still significant risk in Europe, the upcoming U.S. election, and the “fiscal cliff,” I am comfortable with a shift to large caps, which are usually less volatile and hold up better in weaker market environments. I am not predicting a weak market but I do not mind carrying less risk into the fall given the many looming issues.
The value signal issued by the Style model last month for the first time remains borderline. Two more indicators shifted toward value for September, insider activity and relative valuation. I still see the shift from growth to value as a relative valuation call. Growth has outperformed value this year and while the economy is weak, it is still growing. An economic tailwind is good for value stocks. It appears that value stocks are finally cheap enough to warrant investment.
The recently expired Mid Cap signal proved inaccurate. Since it went into place on April 1st, MDY returned -5.23% against -2.20% for the S&P 500. As noted above, small and mid cap stocks lagged the summer rally. Small and mid cap stocks usually lead rallies. The action this summer reveals how wary investors remain even as the market has risen.
The first month of the new value signal also was off target. IWD did rise 1.94%, matching the S&P 500 during August. However, growth led the way in August with the Russell 1000 Growth (IWF) rising 2.88%. Apple and Google rose sharply in August, leading growth stocks higher. Fortunately, both of these stocks are in Northlake’s individual stock portfolio.
Disclosure: SPY, IWD, AAPL, and GOOG are widely held by clients of Northlake Capital Management, LLC. MDY is held in select Northlake client accounts. Steve is sole proprietor of Northlake, an Illinois-registered investment advisor. Filings can be found at www.sec.gov. AAPL and GOOG are net long positions in the Entermedia Funds. SPY is a net short position in the Entermedia Funds. Entermedia is a long/short equity hedge fund focused on media, communications, and related technologies. Steve is co-portfolio manager of Entermedia, owns a stake in the funds’ investment management company, and has personal monies invested in the Funds.