The spread of COVID-19 has disrupted many industries and livelihoods, creating record levels of equity volatility. Governments and central banks have already stepped in to help, and are likely to do more. While we expect conditions to eventually improve, in all of our models we assume that we are in an 18-month worldwide recession.

Crisis Management

During the 2008 financial crisis, we learned that banks and homeowners were borrowing too much. The US government later put in place new borrowing limits to constrain speculative behaviors. It worked: today, banks and homeowners are in a strong position to help others. Our country is built to recover and learn from its mistakes.

Over the last few months, we learned how unprepared we were for a global pandemic. A lack of protocols and protective equipment has resulted in on-the-fly decision-making. But, we are also beginning to see solutions form. Social distancing is being practiced widely, and many workers have figured out how to repurpose their roles remotely.

Through this, we are witnessing the expanding potential of the world’s online infrastructure. The web is keeping us connected and informed, while also enabling essential businesses to function. Many companies will benefit from this acceleration of offline to online practices. But first they must survive a recession. Within our portfolio, we are focused on:

  1. Leadership: Are managers making difficult decisions while supporting those in need?

  2. Liquidity: Can the company afford at least two years of expenses if revenue falls 50% or more?

  3. Sales Channels: How is the company accessing customers when other channels close?

More Volatility = More Opportunities

During the first quarter, we repurposed 25% of our portfolio. This compares to <10% in a typical quarter. Below is a breakdown of our actions:

  • Exited holdings w/ extreme pandemic exposure: Eventbrite,, Vail

  • Trimmed holdings trading at all-time high multiples: Adobe, Adyen, Netflix

  • Held onto Airbnb in spite of a -70% shock to the travel sector

  • Added to quality holdings at depressed prices: Pinterest, Starbucks, Spotify

  • Initiated new positions in great growth companies: Square, Shake Shack, Etsy

Exiting three positions while initiating three in a single quarter is a rare event. We liken the travel industry in 2020 to the banking industry in 2008. There will be changes, some of which will limit old business models from returning to peak profitability. The US consumer, on the other hand, always comes back in a big way. People will once again eat Shack Burgers, furnish their homes on Etsy, and wave their phones at Square readers.

Upholdings Updates

We continue to work towards making this fund available as an ETF. Our progress was slowed a little bit by this crisis, but we are continuing to lay the groundwork.

In the quarter, we supported two organizations to help those impacted:

  • COREGives: Restaurants were the first industry in the US to abruptly lay off millions; this organization helps affected families with their essential expenses.

  • Give2Asia: China was the first to experience the virus and had the least amount of time to prep its hospitals; this organization helped to provide essential medical supplies.

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