ResearchRight sizing positions in Flagship

Right sizing positions in Flagship

Feb 27, 2024

On Tuesday, we elected to add to four existing positions from our strategic cash holdings, including Adobe (ADBE), Alphabet (GOOG), Disney (DIS), and Meta Platforms (META).

The result of the trades increased our net exposure to ~96% in Flagship while reducing our strategic cash weight to ~4%.

Let’s dive in.


Right sizing positions in Flagship

Adobe (ADBE) has been down ~12% over the last month, largely following OpenAI’s impressive beta launch of Sora, a text-to-video AI tool viewed as a competitor to Adobe’s core Creative Cloud business. Although disruption risk still remains high, Adobe is a durable software company that has plenty of runway when it comes to enterprise penetration and is likely to accelerate its shareholder returns program following the Figma deal falling through. We elected to add here on the recent stock price weakness as we believe the risk/reward profile has improved.

It’s fair to say that Alphabet (GOOG) has stumbled through its rollout of its artificial intelligence models, leaving investors questioning the search giant’s ability to deliver accurate, unbiased results. As long-term investors, we benefit from a long-term time horizon here - the company has been spending billions of dollars on AI for years, and we believe they have unmatched infrastructure and research to emerge as an AI winner if they make some difficult but critical moves around cost cutting and cultural changes (which investors are now mobilizing and pushing for). Google is a monopolistic search compounder with double-digit growth, and we elected to add to our position at a favorable valuation.

Disney’s (DIS) recent earnings report highlighted early signs of momentum following Iger’s execution to date. The EPS guidance exceeded expectations in large part due to cost-cutting measures and elevated Parks and Experience spend, leading us to believe the worst may be behind the entertainment conglomerate. The recent results give us confidence in Disney’s streaming future; we believe profits are well-positioned to inflect amid the company’s password sharing initiative, the Hulu and Disney+ merger, and an improving content slate. 

We trimmed Meta Platforms (META) ahead of their earnings print in January as we felt the valuation was stretched after a strong start to the year. Earnings results came in well above our expectations, resulting in our forward earnings estimates rising more than we anticipated and thereby making the valuation even more reasonable than we’d originally thought. This long-term compounder seems to have its mojo back - it’s operating efficiently, returning capital to investors, and we added to a company that’s uniquely positioned to benefit from AI innovation moving forward.  

The results of the trades increase our net exposure to ~96% as we put more of our strategic cash to work in an effort to right size some of our holdings. 

As always, let us know if you have any questions about the recent trades; we’re happy to assist.

– Your Titan Team


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