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Active Equity

CCM's Active Equity portfolio is an actively managed stock portfolio for accounts over five hundred-thousand dollars that seeks to gain exposure to the highest growth themes in the stock market. Advisors will receive timely updates on any changes in the portfolio so they can keep their clients informed. 

Active Equity Strategy Overview

Active Equity Strategy Overview

The strategy uses a well defined process to drive returns.

Active Equity Risk Details

Active Equity Risk Details

See an overview of the model's risk assessment based on an historical analysis of underlying holdings

Latest Trades (April 12, 2024)

Additions…

We have made new allocations within CCM Active Equity ( “The Equity Sleeve”) to Vertiv Holdings (VRT) 3.3% and Eaton (ETN) 2.75%. We view data centers as an above-average and possibly generational growth market. In addition, reshoring and increasing electricity demand have been themes we have been emphasizing.  Both VRT and ETN give us exposure to these themes.  

 Vertiv

Vertiv Holdings Co. is a global leader in designing, building, and servicing critical infrastructure that enables vital applications for data centers, communication networks, and commercial and industrial facilities.

VRT is a leading global supplier to data centers, with a product portfolio of highly trusted brands ranging from power and cooling to monitoring and control services footprint. In addition to data centers, it also has a strong position in supplying manufacturing facilities which is a sector that also has strong tailwinds and is a theme we have been bullish on (reshoring).The company has shown improved organic growth since becoming independent in 2017. 

One key part of the global AI/Datacenter investment wave that Vertiv can navigate more nimbly than a software or semiconductor manufacturer is the complex geopolitical/military/sovereign competition surrounding AI.  Increasingly, countries are building proprietary data centers for AI due to military and cultural reasons.  In addition they are increasingly regulating control over data more broadly.  Vertiv is not in the crosshairs of these sovereigns as they are not involved with any sensitive aspects surrounding data.  Vertiv’s strong international footprint should enable them to benefit from global data center growth without being as exposed to headline risk from regulation.

 Eaton

Eaton Corporation Plc (Eaton) is a power management company. It designs, develops, and sells energy-efficient products, technologies and services.  Our primary interest in the company is its exposure to data center growth via its electrical business (both US and International). ETN estimates the global Data Center TAM at around $34B (ETN has 10% market share), with a market growth rate of around 10.8%. We think this estimate is low and will probably increase.

In addition, Eaton’s win rates on mega scale projects historically at 40% have been increasing.

Another general market tailwind is a traditional data server rack consumes around 8-10 kW while AI applications take around 10x the power.  This bodes well for future power products made by Eaton and others.  In addition, as a longer term theme,  the power consumption of data centers in the United States is expected to nearly double by the end of the decade. As of 2022, data centers collectively consume approximately 17 gigawatts (GW) of electricity. However, due to growing demand for AI and machine learning-ready servers, this figure is projected to soar to 35 GW by 2030. This will aid other parts of ETN related such as their utility business.  In sum ETN should be in the sweet spot of many secular growth  themes.

 Reductions…

In order to raise capital for these purchases we had to lighten up on a few existing positions.

 Biomarin 

Biomarin is still an attractive pure play on gene therapies and have recently gotten FDA approval for Rocatavian which is a cure for hemophilia.  However, the uptake has been slow due to a novel pricing structure. We still retain a position but cut it from 5.20% to 3.09%.

 Accenture

Accenture is a great company and will continue to grow earrings.  In the short term (one year), however their guidance was somewhat weak in the last earnings call.  So we cut our exposure from 4% to 2% to take advantage of ETN and VRT opportunity.

 Snowflake

We knew in 2023 when we allocated to AI plays we would not get it all 100% right.  We also knew that we would have to be nimble in this space and not get married to any stocks.  At that time as a package we allocated to small chunks of Mongo DB, Datadog, and Snowflake.  Our thought was as AI took off, these smaller software plays would benefit disproportionately.  This is taking longer than expected and it seems as though some of the hyperscalers might be outcompeting the smaller players. In this space we own large chunks of AMZN and MSFT.  We decided to sell Snowflake (2% to 0%) and keep MDB and DDOG as Snowflake’s valuation is quite high and most at risk.  So we keep some exposure to the smaller players.