An example – Nvidia (a long-time holding in our Elevate Enhanced Global Growth Pool)

In 2017, Nvidia was crowned the smartest company in the world by MIT Technology Review.¹

In 2022, a global semiconductor shortage, coupled with increased demand from areas such as artificial intelligence, autonomous vehicles, robotics, virtual reality, and the metaverse, is contributing to Nvidia’s exceptional growth.

• Nvidia’s quarterly revenue grew at an average quarterly year-over-year rate of 35% over the last five years.
• In fiscal 2022 fourth quarter (ended Jan. 30), the company’s revenue grew 53% year over year.
• Analysts expect Nvidia’s quarterly revenue to rise to $9.3 billion for the company’s fiscal quarter ending Jan. 30, 2023, from $7.6 billion in the last quarter.
• Nvidia is expected to grow its per-share earnings at an average rate of around 25% over the next three to five years.

Given the exceptional performance over the last five years and the strong outlook going forward, one would expect this stock to be surging in 2022. Nope. It is down 46% since January 1.

Why?

Recently stocks have been moving based more on the category they are in rather than fundamentals. Imagine trying to figure out why two unrelated growth stocks – an athletic company and a diabetes device company – are both down 5% on the same day with no news. It is because they are both in the same “growth” trading basket. This is what has made markets so frustrating this year – stocks aren’t trading on company fundamentals.

As we have in the past, we continue to seek investments or managers that have strong fundamentals and are expected to grow significantly over the next 5 years. Markets may yet shift from euphoria to despair, and back, a few times. We constantly search for opportunities, and we do our best to block out the noise and invest in good companies we believe will payoff in the long run.

¹ What are the 50 Smartest Companies? | MIT Technology Review

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