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Quarter	Letter Date	Fund Name	QTD	YTD	Tickers	Themes	Quick Take

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Wedgewood Partners 2023 Q2 Investor Letter | Buyside Digest

Back to Fund Profile (Wedgewood Partners)

Primary Source Intelligence • Q2 2023 Letter Analysis

Wedgewood Partners Quarterly Analysis

Buyside Digest is not affiliated with, and does not endorse, Wedgewood Partners. This analysis is provided for institutional research purposes only and is not investment advice.

Fund Returns

QTD+8.1%

Annualized+11.8%

Positioning StanceConstructive

GeographyUS

Digest Analysis

Quick Take

"Apple, and Alphabet, all benefiting from AI investments and ecosystem advantages. The team trimmed Meta at maximum weight and added to PayPal on valuation."

Executive Summary

Wedgewood Partners delivered 8.1% net returns in Q2 2023, driven primarily by their concentrated holdings in large-cap technology companies. Meta Platforms was the top contributor as the company demonstrated expense discipline and guided to accelerated revenue growth, while leveraging years of AI research and development. Apple continued to benefit from its App Store ecosystem, which facilitated over $1.1 trillion in global billings in 2022. Alphabet returned to revenue growth with its Cloud division achieving profitability, while Microsoft posted strong growth in Office365 and Azure despite some deceleration guidance. The portfolio faced headwinds from PayPal, which saw multiple compression despite solid fundamentals, and Texas Pacific Land, affected by oil price volatility. The managers trimmed Meta due to position sizing limits and added to PayPal, viewing the payment company as undervalued. They remain focused on companies with sustainable competitive moats, particularly those benefiting from AI development, cloud adoption, and digital ecosystem effects, while being mindful of elevated technology valuations across the market.

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Institutional Meta Strategy

Meta Strategy Gauges

Algorithmic conviction, macroeconomic posture, and risk appetite signals extracted from this quarterly letter with qualitative explanations.

Signal Matrix

Market Conviction

78%

CautiousHigh

High Conviction (78%)

The manager demonstrates high conviction through concentrated positions in named holdings like Meta (largest position), Apple, and Microsoft as core positions. They provide detailed fundamental analysis for each holding and make specific sizing decisions like trimming Meta at maximum weight and adding to PayPal.

Growth Outlook

25%

BearishBullish

Bearish (25%)

The manager acknowledges that technology multiples have reached relative and historical highs, and notes concerns about elevated valuations. However, they maintain constructive views on their core holdings and see continued growth opportunities, particularly in AI and cloud computing.

Risk Appetite

40%

DefensiveAggressive

Defensive (40%)

The portfolio remains concentrated in large-cap technology stocks with high conviction positions. While they trimmed Meta due to position sizing and paired Microsoft due to valuation concerns, they added to PayPal and maintain core positions, indicating moderate risk appetite.

Capital Deployment

15%

De-riskingDeploying

De-risking (15%)

Limited net deployment activity during the quarter. The manager sold First Republic Bank, trimmed Meta due to position sizing constraints, and added to PayPal. This represents rotation rather than significant new capital deployment, indicating cautious but selective activity.

Forward Guidance

35%

CautiousExpansionary

Cautious (35%)

The manager expresses confidence in their holdings' long-term prospects, particularly around AI investments and ecosystem effects. They selectively added to PayPal and maintain conviction in their core positions, though acknowledge the need for selectivity given elevated valuations.

Language Signal

45%

BearishBullish

Balanced (45%)

Language is predominantly positive when discussing individual holdings, with terms like 'attractive,' 'compelling growth,' and 'sustainable competitive advantages.' However, this is balanced by caution around 'elevated multiples' and 'volatile' market conditions.

Perceived Risk

45%

Low RiskElevated

Moderate Risk (45%)

The manager acknowledges specific risks including elevated technology multiples, banking turmoil impact on customer spending, and oil price volatility. However, these risks are discussed in context rather than as central concerns, suggesting moderate risk awareness.

Opportunity Density

55%

ScarceAbundant

Selective (55%)

The manager sees selective opportunities, particularly in companies that haven't participated in the AI rally like Tractor Supply, and in PayPal due to multiple compression. However, they acknowledge that elevated technology valuations require increased selectivity in the current environment.

Time Horizon

75%

Short-TermLong-Term

Decade+ (75%)

The manager demonstrates a long-term orientation, discussing multi-year trends like AI development, ecosystem effects, and sustainable competitive advantages. They reference holding Apple since 2005 and focus on companies with durable moats rather than near-term catalysts.