Our 2019 second quarter performance for the Institutional share class was +6.04% compared with S&P 500 Total Return at +4.30%. Year-to-date performance for the Institutional share class was +26.55% through June 30 compared with +18.54% for the S&P 500 Total Return. For the trailing twelve months ending June 30, 2019, performance for the Institutional share class was +23.17% compared with S&P 500 Total Return at +10.42%.
According to press reports, the S&P 500 just concluded the strongest first half of a calendar year since 1997. We are pleased to report that our Fund’s performance has been stronger than the index despite a cash position which increased from 10.0% at the end of the first quarter to 15.9% at the end of the second. While we reduced positions in a couple of names and exited another during the quarter, the Fund’s cash position increased primarily as a result of positive net inflows from investors. We have not actively raised cash with a macro or tactical view in mind, but have elected to retain the net inflows as dry powder for future buying opportunities and to meet potential redemptions.
Our top-5 performance contributors during the quarter were Mastercard, CarMax, Visa, Moody’s, and SBA Communications. In our view, CarMax (KMX, Financial) has been among the cheapest stocks in the Fund as its valuation suffered from uneven used vehicle comp performance and a narrative that digital disruption was taking a toll. We believe the market has started looking forward to the nationwide roll-out of CarMax’s omnichannel offering in early 2020. Optimism has also been bolstered by the strongest used unit comp performance in five years as reported for the quarter ending May 31.
Our only four detractors from performance this quarter were Ubiquiti, O’Reilly, Focus Financial, and Alarm.com. The combined impact to performance for all of these was less than 100 basis points.
We wish you a wonderful summer and look forward to providing you with another update after the third quarter.
Chuck & John
