Crescent Park & Recreation – Party Like its 1999

3

Dear Partners & Friends,

August has usually been one of the stock market’s weaker months historically. While we don’t pay credence to otherwise spurious correlations, we nonetheless hope many of you get some well deserved time off this month.

I. Party Like its 1999.

The equity markets, and technology stocks in general, have been partying like its 1999. In lead up to a few recent client updates, we put the following charts together on the current market environment. The first chart is a widely followed index of non-profitable technology companies. This index has risen by over three times since the beginning of 2020. The total market cap currently tied up in money-losing technology companies is larger than at any time since the late 1990s (nearly $1 trillion). The second chart looks at the percentage of companies in the US who are profitable after their IPOs. In 2020, only 22% of companies that went public were profitable. At Crescent Park, our goal is to invest in businesses that convert earnings into free cash flows at high rates, typically owing to capital light business models. As this free cash flow grows, intrinsic value should compound significantly higher over time.

II. Lingering Virus.

The rise of the Covid-19 Delta variant has considerably increased global case counts and hospitalizations. While this surge has been unfortunate, we do not foresee a high probability of severe declines in economic activity like we saw in the Spring of 2020. Low level disruptions seem almost certain to occur this year in many countries including those, like the United States and Western Europe, that have widespread access to effective vaccines. Nonetheless, we are monitoring the situation closely as the CDC has advised that the Delta variant is more transmissible than the viruses that cause MERS, SARS, Ebola, the common cold, the seasonal flu and smallpox. Stay safe.

III. Climate Change.

It is becoming increasingly difficult to ignore what is happening in terms of fires, rain, flooding, and other climate related calamities around the world. In the United States this year, 37,803 fires have burned more than 3 million acres, per the National Interagency Fire Center (NIFC). During the same period in 2020, 32,059 fires burned a total of 2.1 million acres. The incidence of severe drought in the Western United States is at unprecedented levels. Our friends in the United Kingdom have also felt the effects with heavy rain and flooding coming recently on the heels of a heatwave and record-breaking seasonal temperatures.

 

IV. Full Focus Planner.

I have always sought out ways to improve my efficiently at work and home. As a result and based on a recommendation, I picked up the attached daily planner in an attempt to better manage time and priorities. So far, I have found the layout and structure to be highly effective. In particular, getting away from lengthy daily to-do lists is a much better use of one’s time. The planner allows you to break your goals down in to long-term, medium-term and daily tasks. The reality is there are a handful of things we really “have to do” and a lot of noise otherwise. I have attached a link to the company web-site if of interest.

V. 2020(21) Olympics.

I have been playing more golf recently as well as watching the 2020(21) Olympics.  In that spirit, I thought I would share a picture of Xander Schauffele who won gold in individual stroke play for the United States.  Also of note, while China, Russia, and the United States lead the medal count this year per usual, I thought it worth noting that Bermuda is in the running for having the lowest population per medal count.  With a population of 63,000, it became the smallest region to win a gold with Flora Duffy’s triathlon victory on July 30.

All the best,
Pete

⟵ Back to Insights