Aug 2020: High Net Worth Sleeve Update

by | Aug 31, 2020 | Rebalance Rationales

HNW Holdings Update

The HNW sleeve is designed to give equity exposure to a group of individual stocks that we think offer attractive prospects through a combination of yield, growth, quality, and reasonable valuations relative to large cap peers.


As we know, Alphabet, Inc. (GOOGL) is a household name that focuses on advertising, operating systems and platforms, enterprise, and hardware products. With 40% market share in global digital advertising, GOOGL is the behemoth in this space.

We see Alphabet as one of the best-positioned companies in the digital ad sector, with exposure to some of tech’s most important secular trends through mobile search, YouTube and enterprise cloud computing. We expect Cloud to become a more central component of the thesis over time (as the business scales and margins improve) and expect Google to continue capturing market growth from the ongoing shift towards digital advertising. Key risks include revenue impact from potential product changes mandated by regulators, weaker-than-expected cost discipline, competition, and dilutive M&A.

As of right now, we believe that there is a substantial disconnect in GOOGL’s current valuation relative to itself, and more importantly, versus its peers. In fact, we believe that Google should trade at a premium to its peer group (currently trading at a discount), given its shareholder friendly actions (buybacks and disclosures) and new product catalysts. As of right now, we do not think that GOOGL is getting credit for their penetration into the Cloud space, which adds a larger kicker to potential valuation expansion. GOOGL case study here


We are selling one of the original holdings in the HNW sleeve, Apple, Inc. (AAPL). After much spirited, yet collegial debate, we decided to sell AAPL based on its valuation. We believe that there is no longer an outsized asymmetry to the upside in this name, as it trades at a near 100% premium to its 5-year historical averages on almost all valuation metrics. Thus, we are swapping into GOOGL, as we believe it trades well below its intrinsic value.



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SPDR S&P ETF Trust is an exchange-traded fund incorporated in the USA. The ETF tracks the S&P 500 Index. The Trust consists of a portfolio representing all 500 stocks in the S&P 500 Index. It holds predominantly large-cap U.S. stocks. This ETF is structured as a Unit Investment Trust and pays dividends on a quarterly basis. The holdings are weighted by market capitalization. The volatility (standard deviation) of the Impact Series may be greater than that of the SPDR® S&P 500® ETF.

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