An Increasingly Customer-Centric World

To Our Investors and Friends,

The S&P 500 finished the second quarter up 3.8%, ending close to an all-time high as the trend towards global easing continued. Oil prices (WTI) fell 2.8% over the same time frame to approximately $58.50, as signs of a global slowdown increased in the face of trade tensions. The 10-year Treasury Bond continued to slide in the quarter to 2.01%, a 41 bp drop from the end of last quarter. The spread between the 2- and 10-year widened to 26 bps, and the short end of the yield curve has become even more severely inverted.  Throughout the quarter, the stock market lurched in an 8% range as trade fears and signs of an economic slowdown were offset by anticipation of rate cuts and a continuation of easy monetary policies.  The Russell 1000 Growth index expanded 4.6% and the Russell 2000 Growth index grew 2.8% in the quarter, both continuing to beat their respective Value indexes by about 1% each.

We believe a next generation of businesses is emerging that is making great use of the tools provided by the Fourth Industrial Revolution, such as Artificial Intelligence, the Internet of Things, and Next Generation Data Analytics, driven by the combination of expansive data sets and low-cost computational processing. These leading companies have new business models that are customer centric, instead of the product-centric business models of the previous industrial revolutions. Subscription-based models are often success-based revenue models – the value of the customer relationship grows as the customer benefits from the subscription-based technology. This close relationship between a business and its customer refocuses research and development efforts to be driven by customer feedback and need, instead of speculation. In the end, decision making is data driven and vastly more efficient than the guess work of the past.

We think that the more the economy is driven by customer-centric businesses, the less cyclical and capital-intensive the economy becomes. Stability and predictability replace the speculative behavior of the past and should ultimately lead to stronger businesses that the market values more. When a business moves from a single transaction with the customer to an ongoing relationship, the investor’s focus should move from unit economics to annual recurring revenue and customer relationship longevity. Leading businesses that are helping their customers succeed start the year with 90-95% of the previous year’s revenue and build from there, driving both high and predictable revenue growth rates.

Our previous studies have suggested that new businesses, those less than 25 years since their founding, are much more customer centric than ones that have existed for much longer. Our portfolio has an average age of about 22 to 23 years, but primarily consists of businesses that are between 10-20 years old. We will continue to focus on this part of the market and expect that high and predictable revenue growth will lead to larger businesses and stocks over time.

Kingsland Growth Advisor’s lead strategy, the Long-Term Growth strategy, continues to build on a successful start. The strategy seeks to identify and own the next generation blue chip companies, those businesses that have the ability to grow 500-1000% over the next ten years.  The stock selection process we employ to successfully identify such companies is the result of 25 years of growth investing in the best opportunities available to the public markets. The strategy is up 41.4% YTD and compares favorably to the Russell 2000 Small Cap Growth index, which expanded 20.4% over the same time frame. Over the last year, the strategy is up 26.0% vs a decline of 40 bps for the Russell 2000 Growth Index. This strong beginning suggests to us that our focus on customer-centric business models may be a good focus. If our observations on the changing economy prove accurate, we would expect we can continue to deliver on our goal of meaningful capital appreciation. We welcome you to contact us to learn more about how we search for great growth companies that will emerge from the Fourth Industrial Revolution.

All the Best to You,

AKW

Empowered Employees Lift Stock Prices

To Our Investors and Friends,

The S&P 500 finished the month of May down 6.6%, paring back its gain for the year to 9.8%. Oil prices (WTI) fell 16.3% to just over $53 a barrel, driven by more signs of a global slowdown. The 10-year Treasury Bond dropped 38 basis points in the month and is now down 55 basis points to 2.13% since the beginning of the year. The spread between the 2- and 10-year remained at 19 bps, but the short end of the yield curve has become more severely inverted.  This severe reaction across markets is directly related to escalating trade tensions between the US and China. Last week, the Trump Administration increased market concerns by threatening major tariffs on Mexican imports. This economic action on our largest trading partner designed to force Mexico to implement stronger border security may drive our industrial economy into recession. The market is beginning to price this in. The Russell 2000 Value index performed the worst, down 8.2% for the month. The other major indexes faired poorly as well – the Russell 2000 Growth fell 7.4%, the Russell 1000 Value dropped 6.4%, and the Russell 1000 Growth declined 6.3%.

We know that investors have entered a period of heightened anxiety, but what happens if this spills over to Corporate America? Over the last 30,000 years, humans have dramatically advanced technology across all facets of life. Despite all that innovation, at the heart of it, our DNA and our primal instincts have not evolved. As a result, we are subject to primal fears that often leads to both a resistance to change and poor decision making. We decided to see if empowered employees – those that have a sense of purpose instilled by their leaders - are having a positive impact on their company’s stock performance. We compared the Glassdoor ratings that employees give their employers on all S&P 500 companies, and then determined if there was a correlation between ratings and stock performance. Intuitive Surgical received the highest rating of all companies, where 96% of employees recommend the company to their friends, and the average employee gave the company a rating of 4.6 out of 5 (92 out of 100). The lowest rated companies were collectively the railroads, where only 28% of employees recommended the companies to their friends, and the average employee gave their companies a ranking of 2.4 out of 5 (48 out of 100).

As can be seen in the Chart below, only those companies most highly ranked by their employees experienced a noticeable impact on their stock prices over the last five years. This shouldn’t be surprising because according to the September 2017 issue of Inc. magazine, only 32% of employees are engaged. Wikipedia defines an “engaged employee” as one who is enthusiastic about his or her work, and acts in a way that benefits the organization’s business. A disengaged employee often is one that does the minimum amount of work for his or her company, and sometimes seeks to damage the business. We believe these behaviors intensify during periods of uncertainty. We believe in the power of engaged employees, and think that they will help their companies perform better as businesses, and as stocks, over the long term.

Source: Glassdoor - Company rating number is the best of 5 and was adjusted to fit the chart.

Kingsland Growth Advisor’s lead strategy, the Long-Term Growth strategy, just completed its first full year since inception. The strategy seeks to identify and own the next generation blue chip companies, those businesses that have the ability to grow 500-1000% over the next ten years.  The stock selection process we employ to successfully identify such companies is the result of 25 years of growth investing in the best opportunities available to the public markets. It has been a fantastic start. The strategy is up 17.7% in this tumultuous year, and compares favorably to the Russell 2000 Small Cap Growth index, which declined 6.9% over the same time frame. In a world in which both luck and skill will always play a part, we believe this start should provide some confidence that stock-picking skill is a big factor in this strategy. We welcome you to contact us to learn more about how we search for great growth companies that will emerge from the Fourth Industrial Revolution.

All the Best to You,

AKW

We Are Seeking Great Investors, Not Cost Cutters

To Our Investors and Friends,

The S&P 500 finished the month of April up 3.9%, reaching an all-time new high for the market, slightly above the previous high achieved last September. Oil prices (WTI) increased 7.7% to just under $64 a barrel, but remains far below the old September high of almost $77 a barrel. The 10-year Treasury Bond advanced early in the month and then retraced a majority of the gains, finishing the month at 2.48%, a 9-basis point advance. The spread between the 2- and 10-year widened 5 bps to 19 bps and continues to be modestly inverted at the short end of the curve.  This has been an issue for the market all year, but does not appear to be indicative of a recession any time soon. The new economy, represented by the Russell 1000 Growth and Russell 2000 Growth indexes, continued to perform well, although small cap is now beginning to lag its larger peers. For the month, the Russell 1000 Growth advanced 4.5%, and the Russell 2000 Growth increased a more modest 3.1%. Both indexes remain about 5% ahead of the comparable value indexes, and are also up about 21% YTD.

Over the last decade, the largest businesses in the United States have experienced a great divergence in their fortunes foretold by decisions in one key area…future investments.  We believe the most important decisions leadership can make is where to invest in its people and capabilities. These decisions take courage, intelligence, and an open mind to future possibilities. Cost-cutting decisions, on the other hand, are inherently short term in nature, and therefore require far less strategic thought. We believe Corporate America is beginning to feel the effects of years of serial cost cutting. Notable examples are General Electric and The Kraft Heinz Company – and more dominoes will fall as cost-cutting induced devastation is revealed in the coming years. Ten years ago, most companies were faced with a choice: invest in the future, or cut costs to preserve some semblance of the past. Fast forward to today, and those companies that invested during the downturn are a lot larger with much greater growth prospects, while the cost cutters have all but destroyed their cultures and with that, their futures. It is quite difficult to harness the energy of a great idea and make it a great business. It is impossible to re-energize a culture that has been subject to serial cost cutting, leaving it lifeless and purposeless. What do we do when faced with a potential investment in a serial cost-cutter? Run away!

Out with the Old and In with the New!

Initial Public Offerings (IPOs) have always been the lifeblood of Capitalism, and with them comes the hope of a better future. Unlike most previous periods, this year will be defined by the number of Venture Capital unicorns that go public -- those companies that have at least a billion-dollar market value before their IPO. Estimates suggest that over 100 “unicorns” are planning to raise more than $100 billion in proceeds for their IPOs in 2019, a number that exceeds the amount raised during the technology bubble years of 1999 and 2000. We believe that the number and quality of companies going public this year can help lift the economy and support further gains in the market. So far, it has been a bit of a mixed bag in terms of performance of IPOs. Lyft (LYFT) quickly sold off from its $72 IPO price, and is building a base around $60. Pinterest (PINS) was priced at $19 a share, and is up more than 60% in two weeks. Zoom Video Communication (ZM) priced at $36, and is now up more than 100% in the same two-week period. We did not buy any of these IPOs, as they all exceeded our initial market cap thresholds, but we are investigating them all. Over the next several years and months, the market will determine what these businesses are really worth, and over the next decade, we will find out if the market was right. Given the tremendous early volatility in these new issues, we will seek to take our time in first identifying the next generation blue chip companies, and then owning them.

All the Best to You,

AKW

The S&P 500 Index Fund is Being Given Away for Free for a Reason

To Our Investors and Friends,

Last May, we launched our Long Term Growth Strategy. Over that time frame, the strategy has owned between 35 and 38 names that we believe are next generation blue chip companies -- those businesses we think can advance 500-1000% or more in a 10+ year time frame. We won’t be right on all of them, but we think the strategy itself is poised to deliver on its intended purpose:  to grow capital by several hundred percent over an appropriate long-term horizon. Since inception, our Long Term Growth Strategy has advanced 18.6%, which compares favorably to all the major indexes.  During the same time frame, the major indexes advanced between +7.6% (R1000G) and -6.3% (R2000V). The strategy ended its first quarter of the year up 30.9%, and we are excited to see where we go from here.

The S&P 500 finished its first full quarter of 2019 up 13.1%, the best start to the year we have seen in 25 years in the industry. But even so, the index remains 3.3% below the highs achieved last September. For the quarter, oil prices (WTI) rebounded 31% to just over $59 a barrel. The 10-year Treasury Bond fell 28 basis points to 2.4%. The spread between the 2- and 10-year narrowed 4 bps to 14 bps and remains modestly inverted at the short end of the curve.  Although a concern for the market, we do not think that it indicates a recession is near. The new economy, represented by the Russell 1000 Growth and Russell 2000 Growth indexes, jumped out of the gate up 16.1% and 17.1% for the quarter, respectively. Both continue to advance faster than the Russell 1000 and 2000 Value indexes. Why is that? Technology dominates growth, and the S&P Technology components grew 19.8%, while Financials dominates value, and the S&P Financial components increased at a less robust 8.5% rate.

We believe the economy is undergoing tremendous change as the Fourth Industrial Revolution begins to take shape. Massive computing power and fantastic amounts of data are now available to all, allowing individuals to make vastly better decisions and for creative thinkers to give life to their ideas faster and cheaper than has ever been possible before.

We believe there is a reason why many passive firms are offering index funds for almost zero cost. The index is a great representation of what the economy was, but a poor one of what it is becoming. Those owning S&P 500 index funds in an attempt to gain exposure to the best America has to offer are being left behind. We examined the largest 250 stocks in the S&P 500, representing 87% of the total index weight. We compared age of business to cumulative revenue growth and cumulative stock appreciation over the last 5 years. As can be seen in the chart below, companies 25 years or younger are growing dramatically faster than older members of the index, yet their stocks are not expanding as fast as the underlying revenue. Much older companies with slower growing businesses are experiencing much greater stock appreciation relative to the actual growth the companies are experiencing. This runs counter to popular opinion that growth companies are overvalued vs mature businesses. In fact, the opposite may be the case.

We think this is supportive of our strategy to search out the next generation blue chips. The fastest growing businesses are early in their development, and have the opportunity to expand into much larger entities. Our 37-stock portfolio has an average age of 23 years since their founding, and the vast majority are between 10 and 20 years old. These businesses are in their prime growth years. We will continue to make sure they remain on the right path, making adjustments to the portfolio as needed. Many things can go right and wrong in the young life of these businesses. Every quarter is a report card on the development of these businesses. We will remain vigilant on making sure only those businesses that are executing continue to earn their position in the portfolio.

All the Best to You,

AKW

A Continuation of the Golden Era of Growth!

To Our Investors and Friends,

February saw a continuation of the robust performance that the market experienced in January.  The S&P 500 finished up just shy of 3.0% for the month and is now up a little more than 11.0% year to date. For the month, oil prices (WTI) rebounded 6.4% to just over $57 a barrel. The 10-year Treasury Bond advanced eight basis points to 2.71%. The spread between the 2- and 10-year widened 3 bps to 21 bps and remains modestly inverted at the short end of the curve.  The new economy, represented by the Russell 1000 Growth and Russell 2000 Growth indexes, recovered 3.6% and 6.5% for the month, respectively. Both continue to advance faster than the Russell 1000 and 2000 Value indexes.

The market’s advance YTD continues to be driven by growth companies, as modest inflation favors unit growers (emerging businesses) over those companies dependent on price increases (mature businesses). The millennials favor these emerging businesses and are making decisions that are benefiting the “new” over the brick and mortar dependent competitors. Advances in technology are disrupting more capital-intensive businesses across industries. Often, the disrupter offers a solution that is an order of magnitude better (measured in price, easy of use, or speed) than what it is replacing.  As suggested by the Life Cycle of Companies chart below, I believe millennials are accelerating the growth of the next generation blue chips, causing the previous generational blue chips to deteriorate faster. It is good to be a growth investor!

Life Cycle of Companies

On the evening of the last day of February, Tesla (TSLA) announced that it will rollout the $35,000 Model 3. This is the first step in EVs taking over the auto market, but instead of a surge in the stock, Tesla was sold off. Why? The company also announced there would be some near-term pain in order to make this a reality. It reminds me of IPG Photonics (IPGP), the leader in fiber lasers, that made a similar move ten years ago. Like Tesla, IPG Photonics needed to lower the price of their more efficient laser to get the CO2 laser users to start adopting the new technology. Fast forward a decade: IPG Photonics shares have advanced by over 1,000% in a resounding display of appreciation for their growth strategy. Humans are predictable. They are going to adopt the faster, cheaper, and easier to use technology that Tesla has introduced. I am going to buckle up and enjoy the ride. I know there are a few people who are paying attention…oil sold off as well.

It is worth mentioning that the KGA Long Term Growth strategy is off to a very strong start at the beginning of the year. While working in the mutual fund world, I noticed that our award winning performance was driven by just a handful of stocks. In fact, approximately 5% of the names generated 50% of the returns. In developing this strategy, I intentionally overweighed the transformative companies, those that I believe have the ability to advance 500% or more in the next few years, so that they represent the vast majority of the portfolio. So far, that is proving to set Kingsland Growth Advisors on the right path. I welcome the chance to guide you on this journey into the future.

All the Best to You,

AKW

A Rapid Recovery to Start the Year

To Our Investors and Friends,

Following a -9.2% return for the month of December (the worst December since 1931), in January the S&P 500 posted one of the best starts to the New Year, up 7.9%. Oil prices (WTI) rebounded 18.5% to just under $54 a barrel. The 10-year Treasury Bond dropped five basis points to 2.63%. The spread between the 2- and 10-year remained at 18 basis points and is still inversed at the short end of the curve.  The new economy, represented by the Russell 1000 Growth and Russell 2000 Growth indexes, rebounded 9.0% and 11.6% for the month, respectively. Both are starting the year off slightly ahead of the Russell 1000 and 2000 Value indexes.

January’s gains are being fueled by positive resolutions to a number of market concerns. The most important one is fears of rising interest rates, which were calmed by the Fed’s comments to the market this week. Recession concerns are also dissipating as companies report earnings and provide confidence that the economy may be less robust than in recent months but shows no signs of recession. The market still needs the China Trade War to be settled and the Mueller probe to conclude to tamp down the last elements of uncertainty. We think both of these matters are likely to be resolved by the end of the quarter and should set the stage for double digit returns from here for the next 11 months of 2019. The S&P 500 needs to move up another 8.4% to make an all time new high, which we believe we will likely see by year end.

We are in search of the next generation blue chip companies, those companies that can grow several hundred percent in size over time. This is a rare breed for sure, but we have been searching for such companies over the last 25 years and have more than Malcolm Gladwell’s suggested 10,000 hours to develop such an expertise. We believe there are an increasing number of companies that meet our criteria, which are all benefiting from the current golden era of growth environment. This environment has been created by the culmination of a technology savvy generation of Millennials that are increasingly making investment decisions, the rapid dissemination of new ideas enabled by the internet, and global markets that allow every company to go after much bigger opportunities. As we discovered over the last two months, volatility is ever present with this group, but it should enable us to find good buy points in even the most sought-after growth companies.  

Over the last decade, the first Golden Era of Growth beneficiaries, FAANG, drove the performance of the market.  Over this time frame, Facebook stock (FB) advanced approximately 460% (after its challenged 2012 IPO), Apple stock (AAPL) gained approximately 1,190%, Amazon stock (AMZN) increased approximately 2,820%, Netflix stock (NFLX) grew approximately 6,470%, and Alphabet (formerly Google) stock (GOOGL) expanded approximately 570%. This compares to the Russell 1000’s 370% gain and the S&P 500’s 227% advance over the last decade. We think the market is going much higher over the next decade, and that it will be led by the next generation blue chips. We are passionate about finding these next generation growth beneficiaries and believe our long term philosophy will help us capitalize on them. We are very excited about the future, and invite you join us on this journey.

All the Best to You,

AKW

Rage Against the “Yes” Machine

To Our Investors and Friends,

The S&P 500 had its worst quarter since the Great Recession in 2008, down approximately 14%, knocking the last 15 months of gains out of the market. Oil prices (WTI) fell even harder, ending the quarter down 38% to just over $45 per barrel. The 10-year Treasury Bond dropped 37 basis points to 2.68%. The spread between the 2- and 10-year is now 18 basis points and has inversed at the short end of the curve.  The new economy, represented by the Russell 1000 Growth and Russell 2000 Growth indexes, fell 15.9% and 21.7% for the quarter, respectively.  

The reasons for the market correction are clear…fears that the combination of tighter monetary policy and a global trade war will result in a deceleration in the economy, if not a recession.   We believe the severity of the correction can be attributed to the market’s overemphasis on the short term, driven by a combination of quant funds that immediately respond to changes in conditions, and passive investments that don’t respond at all to new conditions.  In fact, we have to go back to 1987 to see what an overreliance on new technology can do to the market when many participants act in unison. The “Yes” Machine is a quantitative algorithm written by humans that is 100% reactive and 0% anticipatory.  These machines do what they are told, with little regard to the price level at which they are transacting.  The effect is amplified when fund liquidations create indiscriminate selling pressure. Although humans are not as fast as machines, they are far better at anticipating what may come next, if given discretion to do so.  In 1987, after the market swoon, there was no recession. In the end, it was a healthy correction within a robust bull market. We think that is the most likely scenario for this correction as well, and we are positioning the strategy with this view in mind.  

Still, the damage has been done. The market needs to regain its confidence, which likely comes with new fundamental information to bolster it. This can be a firming up of trade relations (especially with China), the end of Fed tightening, a resolution of the Mueller investigation into the Trump White House, or simply a reaffirmation of a positive economic outlook one company at a time.  We think this correction process likely lasts through the first quarter of 2019, and likely will be followed by a meaningful recovery in the second half of 2019.  

We will use this correction to first identify and then own companies that have the right ingredients to become the blue chips of tomorrow…the Millennial generation’s Blue Chips.  We think the economy continues to change from one dominated by capital equipment to one dominated by software and services.  The Baby Boomer Blue Chips are largely capital intensive and often subject to boom/bust cycles.  The Millennial Blue Chips are often driven by more predictable subscription software and service businesses that should ultimately be far more profitable.  We are very excited about the future, and invite you join us on this journey.

All the Best to You,

AKW

November’s Tepid Rebound: The End of the Correction?

To Our Investors and Friends,

The S&P 500 rebounded 1.8% in November, roughly 25% of what the market lost in October. Oil prices (WTI) continued to fall, ending the month down 22% to just over $50 per barrel. The 10-year Treasury Bond fell 14 basis points to 3.01%. The spread between the 2 and 10-year is now a mere 20 basis points.  This flattening of the yield curve is certainly causing some investor concern.  Our favorite growth proxies, the Russell 1000 Growth and Russell 2000 Growth indexes, rebounded to finish up .9% and 1.5% for the month, respectively.  Weak oil, continued interest rate concerns, and worries over a potentially escalating trade war suggest that the correction that began at the beginning of the quarter may not be over yet.  

We do not think we are going to have a recession, and believe the evidence so far suggests this market correction is nothing more than a pause in a longer bull market.  The internet revolution is touching just about every industry in profound ways…morphing business models; replacing a focus on lumpy capital spending to more consistent services spending (the software as a service model is the best example of this); and improving management decision-making based on data.  But our concern is that some of the great stocks that drove the market over the last ten years are getting tired, and their leadership is waning.

The stock that most exemplifies this change is Apple (AAPL), which fell 18.4% during the month.  Apple is a mature growth company - its 9% revenue growth rate over the last 5 years is projected to slow to mid-single digits over the next few years (a 50% reduction that may still be optimistic).   The company has a following amongst both growth and value investors, and likely is no longer going to lead the market.   It was a standout over the last 5 years, increasing over 120% vs the S&P 500’s 53% gain.   The company generated $94 billion in cash flow last year and paid out almost $14 billion in dividends (1.6% yield), while buying back $72 billion in stock.   With this kind of cash generation, the stock can participate in market appreciation, but with slowing growth, we don’t think it leads anymore.

Microsoft (MSFT) is a different story and overtook Apple as the S&P’s biggest component this month.   The company has produced revenue growth of around 7% for the last 5 years and accelerated to double-digit revenue growth recently as cloud revenues, which are increasing much faster than the overall company, continue to drive the business.  The company generated almost $40 billion in cash over the last year, paying out $13 billion in dividends (1.7% yield), while buying back a much more modest $11 billion in stock.   Microsoft is investing in its cloud business, which should bolster future gains in revenue and ultimately stock appreciation.

The market is exhibiting behavior that suggests it will consolidate well into the new year before moving higher.   We think the internet-fueled business transformations ultimately drive the bull market forward, but it may take some time for investors to renew their confidence in this, given the ongoing concerns mentioned earlier.  We are using this time to build positions in new, smaller businesses with great potential, that are replacements for some of our long-time winners. 

All the Best to You,

AKW

Market Sinks in October on Trade War Fears

INTRO:

I am launching our first monthly investment letter after the worst month the market has seen all year. The purpose of this letter is to provide some insight into my thought process on stocks, the market, and the economy. I will also spend more time discussing data than speculating on an uncertain future. Market speculation is rampant, and a focus on facts over fiction is more important than ever.

I have a long term view, but will always look to use market fear and greed as opportunities to add alpha to portfolios…by either harvesting profits for winners that no longer offer as much alpha going forward, or adding to positions when indiscriminate selling provides discounted prices.

October 2018 Investment Letter

To Our Investors and Observers,

The S&P 500 sank 6.9% over the month, and would have been closer to 10% had it not been for a market rally over the last two days of the month. Oil prices didn’t recover, and fell 13% for the month. The 10 year Treasury Bond, the best proxy for interest rate impacts on the economy, moved up 10 basis points to 3.15%. Our favorite growth proxies, the Russell 1000 Growth and Russell 2000 Growth indexes, fell 8.9% and 12.7% respectively. This performance was the worst the market has experienced since the summer of 2011.

There are many reasons why this may be happening. The market has become fearful over interest rate increases (which appear minor to me), the prospects for slower growth or recession brought on by a trade war, and fears surrounding the political future of the country. One of these concerns will be resolved on Tuesday of next week, and most likely will lead to a relief rally. The trade tariffs started impacting companies at the end of September, and despite modest changes to earnings guidance (so far), industrial companies like Caterpillar, United Technologies, and 3M sold off on fears that tariffs could significantly impact profits in the future.

Not every stock performed poorly last month. Tesla (TSLA), the leading manufacturer of electric vehicles and our favorite auto manufacturer, was up 27% for the month. Against many Wall Street views to the contrary, the company produced a record amount of vehicles, revenue, profit, and cash flow! Tesla will remain controversial, especially given its mercurial leader. Still, I am impressed with the results….and will look for more of the same in the future.

There were a few other stocks that moved up during the month, but were predominately defensive consumer staple businesses like Coca Cola Company (KO) and Procter and Gamble (PG). For the sake of future economic prosperity, let’s hope Washington and the White House settle this trade war quickly.

As the market declined, I added to positions that I think are undiscovered. Conversations with other investors (that were generally unaware of these businesses) suggest I may be on the right path. I believe undiscovered revenue and earnings power is the fuel to higher stock prices….I think it generally reveals itself during earnings season, and often leads to out sized moves in stocks. As we move through November, the elections and earnings season will end, and hope surrounding 2019 should begin to help stabilize and then advance the market. Although I don’t know if the worst is over, I think we are making our way through this phase of the market.

All the Best to You,

AKW