Switching gears a bit, we’re going to spend a little ink working through insights into our various strategies. Quarter end is always a good time for these sorts of things but more importantly, October marks the end of our first full year of results following some necessary redesign work done at this time in 2016. We think you’ll be pleased to see that the changes we made are paying off nicely.
New Power Expanding Investment Universe (again)
In late 2012, regular readers know that we made a notable change to the New Power strategy. Specifically, we expanded the universe of investible options to include “Game Changers” from sectors outside of clean and renewable energy. This is a blurb from our new website, describing the evolution of the strategy since inception in 2004.
Our "New Power" Evolution
Our firm took an early stand in the renewable energy and clean tech sector in 2004 using public securities and exchange traded funds before the emergence of any "green" mutual funds or ETFs. In 2009, our New Power strategy expanded beyond pure-play clean tech and alternative energy to include healthy lifestyle companies; including organic food producers, clean air and water filtration companies, even distributors of green products. Finally, in 2013, we again expanded the universe of options to include "Game Changer" companies from sectors outside of the energy complex as innovators are rapidly challenging incumbent leaders in their own business models. Over the last decade, New Power has evolved from a bright green fund to a bleeding edge, disruptive-technology fund of choice for discriminating investors in a time of great change across many industries. This is an investment strategy that captures great entrepreneurial passion for the future. Above all else, the New Power strategy has a mandate to avoid investments with unaccounted-for negative external costs to society. We are determined to use the New Power strategy to expose our investors to the incredibly powerful positive changes occurring globally.
Strangely enough, the New Power strategy was born in concept to capture opportunities in the energy sector alone. What we didn’t know at the time was that the energy revolution was just the tip of the iceberg for massive dynamic change that was about to occur across multiple sectors. Yes, there are waves to innovation cycles. The last one ended in the mid 90’s with the emergence of the internet as a common household tool. Of course, the internet itself became an enabler for the current wave of innovations that has far greater, deeper implications surrounding a fast moving, more knowledgeable and highly connected world; literally the “Internet of Things”.
New Power is sitting squarely in the surge of this new wave as we have expanded the universe of investible options yet again to include next-generation technologies, specifically those that provide positive value and benefit to society without leaving a trail of external costs (think smoking, firearms, abusive products or services, addiction, gambling, etc.). Examples include cyber security companies, big data networking, robotics and artificial intelligence, smart cities and smart grids, new person to person payment systems, Blockchain technology applications, virtual reality, 3D printing and more.
We are seeing older brand name companies like Cisco, GE, Microsoft and Whirlpool who are quite suddenly buying start-up companies by the week to position themselves for the coming wave. Companies still held privately are leading the charge, too many to count. This is going to be big. Many more are poised to go public in the next couple years creating more liquid options in this space for our New Power strategy.
Results for New Power since we made the first expansion in 2012 have been strong. Looking back over the last five years, net of fees, the strategy has slightly outperformed the S&P 500, which has been no easy task for any in our business, who still pick stocks and actively manage portfolios for clients. We have also handily outperformed our current Benchmark, the Powershares Wilderhill Clean Energy ETF (PBW) which is admittedly not as representative of the current strategy as it once was. We don’t have official numbers yet for quarter end but internally, these are the figures from 12/31/2012 through the close of last week (9/22). We only review our strategy numbers weekly. As a reminder for the 1 billionth time, past performance is no guarantee of future returns and please feel free to review our composite performance disclosure pages on our website.
12/31/2012 – 9/22/217 (Expansion date of New Power to end of last week)
Annualized returns net of all fees for this period – nearly 5 years.
New Power +12.93%
S&P 500 +12.64%
So is this a good time to put new money into New Power? Let me answer that question with my cheesy pinstriped institutional money guy suit on. If you are a long-term investor, meaning you intend to keep money in this strategy for at least 5-7 years, then yes, anytime is a good time. If, on the other hand, you are considering New Power now as part of your unsaid GRQ (Get Rich Quick) financial plan, I wouldn’t recommend it. Many of the stocks in the strategy are up well over 100% and we are far closer to taking profits than anything. In fact, we’ve already started doing so with recent sales of Amazon, Expedia and cutting our Tesla and First Solar positions in half. We are in the mode of capturing gains as we’re seeing some new higher levels of volatility among high-flying tech stocks in the last couple weeks. We are also “powering” down to new positions with better values, higher current free cash flow, and better looking fundamentals. If you are already an investor, it’s been a good ride on the speculative stocks with potentially more to come but you should also temper your short-term expectations.
All said we’re very pleased with results since making the design change back in 2012 and looking forward to the next generation of investments surrounding the Internet of Things. New Power is our momentum strategy representing the aggressive stock portion of any investor’s balanced portfolio, which should include Tactical Equity, Blended Asset, and Income strategies.
Next Up – Worldwide Sectors Results one year after it’s “Extreme Makeover”
Have a great weekend and thank you again for your trust and confidence in our firm.