It’s the heat of the summer and everyone seems to be on vacation. The market is sitting just below its all-time highs, as is the Tailwinds Select Portfolio. However, masked in this strength is some underlying weakness.
As previewed last week, we are entering the two weakest months of the year. There’s a reason markets are weak in the late summer, early fall. However, no one knows what that reason truly is; it just always seems to happen.
For the broader market, there has been an increased amount of selectivity. Fewer stocks are leading the way higher; if you’re not invested in those names, which are essentially the largest tech names, you’re missing the rally. For Tailwinds, we had been experiencing strength across the board, especially in June. July was a different story, however, as the stocks in the Portfolio traded lower on average. Much like the overall market, however, our Portfolio was higher on the month, to the tune of over 1%. This net gain was pretty much based on the performance of one stock in particular, Cryoport.
Coming into July, Cryoport had been a great performer and had grown to being twice as large a holding as any other company in the Portfolio. Thus, when it was up another 36% in July, Cryoport managed to bring the overall portfolio to a gain for the month, despite the average stock being down 2%.
This speaks volumes to the benefits of letting winners ride. As a winning stock goes up, its percentage of the overall portfolio increases, allowing a winner to really dictate the overall performance of a portfolio. Cryoport’s share price, by mid July, had gone up over 230% since we invested. Thus, in the middle of the month, the position had grown to 21% of the total value of the Portfolio. By outperforming so much, it became a self-fulfilling winner for the Portfolio.
That being said, prudence says that you can’t let one stock become too big. And, we have a rule at Tailwinds that, when a stock becomes more than 20% of the portfolio, we need to cut it back in size. So, in mid-July, we trimmed Cryoport by 50%. It is, however, still our largest holding.
Thus, July was a good month for Tailwinds due to one stock. Meanwhile, the rest of the portfolio performed like those stocks in the broader market that are not the big tech names…they languished around.
Looking at the rest of the portfolio, there was nothing very earth shattering going on. 3D Signatures announced a financing and that stock was lower. The rest of the stocks seemed to just pause, giving back some of June’s big gains and really treading water, waiting for the earnings to help determine a direction.
Next month we have earnings for most companies we cover and we’re expecting the Portfolio to awaken from its slumber. We detailed what we are expecting for each company in last month’s July preview, so I’ll not go into each stock again. Suffice to say, earnings are expected to be a big catalyst for several stocks as they are starting to show great traction in terms of driving revenues and earnings. As such, we are really looking forward to August and hope to have an excellent month that pushes the overall portfolio to new highs.