Technology stocks pulled back sharply in November as investors rotated toward value-oriented sectors such as Health Care and Consumer Staples.

Yet Alphabet (Google) stood out for its resilience.

In this month’s note, we explore why Google held up even as the broader tech sector sold off—highlighting its dominant core business, accelerating AI adoption, and uniquely strong balance sheet. We also review sector performance and discuss how our Core portfolios benefited from rotation-driven gains in names like Eli Lilly and Merck.

Equity markets continued to advance in the third quarter, led by strong performance in technology and other structural growth sectors. WestEnd Capital’s Core Strategy remained balanced—maintaining significant exposure to leading AI and data-infrastructure companies while expanding into select industrial and international opportunities. Our latest review details key portfolio developments, including new positions in AMD, Alibaba, and Baidu, as well as the broader economic trends shaping the path ahead.

WestEnd Capital’s 2025 Tax Guide breaks down key updates in the One Big Beautiful Bill Act, covering deductions, credits, retirement rules, small business incentives, and more. Our guide puts these complex changes into a clear, easy-to-reference format.

Despite tariff pressures and global uncertainty, the U.S. and world economy continue to show resilience—and that strength is fueling better-than-expected corporate earnings.

WestEnd’s Core Strategy doubled the index return for the quarter (+21.8% vs. +10.9%), driven by our focused allocations in Technology, Industrials, and select European stocks. In this letter, we highlight how positioning in aerospace and defense continues to benefit from reshoring trends, rising global defense spending, and domestic investment tailwinds from the new OBBBA legislation.

After a week of on-the-ground research across Europe, WestEnd’s equity team returned with fresh conviction in three compelling companies. With macro shifts reshaping the region, we see meaningful opportunity in select European equities.

In our view, staying passive through volatile, policy-driven environments is not a risk-free choice. Rather than committing to a static buy-and-hold allocation, we believe in remaining tactically active.

The April 2 “Liberation Day” tariff announcement sent stocks into a severe volatility patch. We maintained our cash allocation but started buying selectively.

Rising economic and trade policy uncertainty – driven by the on-again, off-again, on-again nature of tariff pronouncements – has corresponded with rising market volatility. Given the uncertainty is not likely to fade soon, we’ve raised 25% cash in portfolios.

NVIDIA and Palantir are two tremendous technology companies, with enviable competitive advantages. Though we believe these things to be true, we still felt it was time to exit our position in Palantir and to substantially reduce our weight in NVIDIA.

Meta Platforms (META) continues to reach new highs, after reporting earnings that WestEnd's Senior Equity Analyst, Ali Mogharabi, calls an excellent quarter for the company.

The ability to deliver sizable outperformance over the past five years—as WestEnd has done—depended on a manager’s ability to identify the artificial intelligence theme not as another business cycle, but as the foundation of a global economic transformation.

NVIDIA has been an unquestionable leader the AI GPU market, with over 90% market share.

The question for investors is whether this dominance can continue.

Volatility returned to markets at the outset of the third quarter. On one of our regular Zoom calls with clients and in a monthly email newsletter, we cited rising interest rates in Japan and the unwinding of a massive “carry trade” as the impetus for selling pressure. At one point, the CBOE Volatility Index (VIX) reached 65.73, the third highest level behind only the 2008 Global Financial Crisis and the 2020 Covid-19 crash. 

We remained calm.

Stocks powered higher in the first half of the year, with the S&P 500 rising +15% and reaching 32 new all-time highs. But a rising tide did not lift all boats. 

Notably, just five companies—Nvidia, Apple, Google, Amazon, and Meta—contributed 62% of the index’s total return in the first half of the year. Consistent with our key theme of being long innovations in cloud and Artificial Intelligence, we currently own four of these companies and have held shares in all five in 2024 (we sold Google in April). 

The strong equity rally that started last October persisted in Q1 2024. 

Profitable technology companies and growth stocks in general continued to lead the way. Two notable exceptions to the positive Technology trade in the first quarter were Apple and Tesla, which fell -11% and -29%, respectively. In March, the U.S. Department of Justice sued Apple, accusing the company of monopolizing smartphone markets. And Tesla’s woes were largely tied to the quarterly decline in vehicle deliveries, the first time that’s happened since 2020. We have never owned Tesla, and we sold Apple on March 5 following a solidly positive tenure in our Core Strategy. 

Performance across the stock market in the third quarter could be summed up in single sentence: interest rates went up, and stocks went down. In our Q3 letter to clients, we wrote that “rising interest rates created some short-term volatility in equity markets, but our companies held up well, and the quality of earnings we have in the portfolio allowed us to outperform on the downside.” 

Rising interest rates created some short-term volatility in equity markets, but our companies held up well and the quality of earnings we have in the portfolio allowed us to outperform on the downside, in our view.

We’ve now arrived at a time when earnings are expected to accelerate to the upside in the coming months, with continued earnings growth in 2024 as margins rebound after a period of softness.

A central theme of last quarter’s letter was how generative artificial intelligence (AI) could drive the next productivity boom.

The earnings implications over a short span of time is nothing short of astounding. So naturally our next question was, which companies are positioned to profit most in the immediate term from the proliferation of this revolutionary new technology?

To find out, we got on an airplane and went to Silicon Valley.

The failures of Silicon Valley Bank and Signature Bank New York—as well as UBS’s takeover of Credit Suisse—dominated financial news headlines in the first quarter. In our March 21 letter to clients, we framed the risk of financial contagion as very low. Our analysis at the time pegged the US banking system as extremely well-capitalized, with Tier 1 capital ratios at very solid levels and loan-to-deposit ratios at almost their lowest levels in 50+ years. 

We still hold these views.