Summitry Select

Summitry Select Portfolio Update – July 2025

7/7/2025

Summitry Select Portfolio Update – Q2 2025

During the second quarter of 2025, the Summitry Select composite increased +15.4% (+15.1%, net), its second highest quarterly rate of return since we launched the strategy in January of 2022. All but one of our positions (SBUX) appreciated, and most were up by double digit percentages. The Composite has returned +26.7% (+25.1%, net) annualized over the past 3 years and +12.9% (+11.5%, net) annualized since inception.

These strong results obscure the tremendous volatility that markets, and our portfolio, experienced during the second quarter. On April 2^nd, President Trump sent equity markets into a tailspin by announcing plans to apply shockingly high tariff rates to virtually all goods imported into the US. The S&P 500 declined by more than -12% over the following four trading days. Meanwhile, hot wars continued to rage in Ukraine and the Middle East, culminating in Trump’s decision to bomb Iran’s nuclear facilities on June 21^st. Despite all this turmoil, markets rebounded sharply from their April lows, as the administration appeared to walk back some of its tariff plans and pushed out deadlines to allow more time for negotiation with trading partners. The S&P 500 somehow managed to end the quarter nearly +11% higher than where it started.

While we await clarity on the outcome of ongoing negotiations and ultimate tariff rates, we are preparing for more market volatility, as Trump’s trade policies are likely to ripple through the economy in unexpected ways. Our sizeable cash balance should allow us to act quickly, if volatility leads to opportunity. As for our current holdings, we believe the businesses we own are well prepared to manage through most outcomes due to their strong competitive positioning, but it is unlikely any business will be completely immune in the near term.

Notable Portfolio Activity

We decided to trim our position in GOOGL during the quarter. We continue to believe Alphabet shares are attractive, trading at a significant discount to the broader market, despite better expected growth and profitability. However, there is no denying that new competitors are making inroads, as evidenced by the rapid growth of OpenAI and ChatGPT. We believe that Google’s AI model capabilities compare favorably to OpenAI, and Google management is making the right moves to defend the Search business by aggressively promoting its Gemini models and making AI Mode broadly available across Google Search. However, when balancing the impact of increased competition with Google’s competitive advantages, and considering current valuation, we decided a smaller position size was warranted.

Investment Performance

Starbucks was the only security in our portfolio that declined during the quarter (-5.9%), likely due to a combination of broad concern about the health of the consumer and the slow pace of progress with the company’s efforts to drive more frequent customer visits. We believe it is too early to tell whether CEO Brian Niccol’s turnaround is working, but we are willing to be patient because of his success reigniting growth at Taco Bell and Chipotle Mexican Grill. Our research suggests that Starbucks is a tremendous brand with a loyal following that can support materially higher sales per location, and we are confident Niccol will figure out how to best unlock that opportunity.

Our best performers during the quarter were NTDOY (+39.9%), TSM (+36.9%), and MSFT (+32.7%).

• Nintendo continues to benefit from excitement surrounding the launch of the company’s Switch 2 gaming console, which became the company’s fastest-selling console ever (3.5mm units sold in the first 4 days after launch). As we highlighted in our previous letter, we expect strong demand for the new console, which includes better video performance, exclusive launch titles (including a new version of Mario Kart), and backwards compatibility with existing Switch titles. The original Switch was launched more than 8 years ago, so there is likely to be significant pent-up demand for a new console from the current installed base.
• TSMC continues to benefit from surging demand for semiconductors that power artificial intelligence globally. Revenue growth in local currency was greater than 40% year-over-year through the first five months of 2025, and we expect increasing demand for TSMC’s services to persist for several years. Additionally, TSMC’s hard earned monopoly position at the leading edge provides the company with pricing power to mitigate margin pressures from escalating fab construction and operating costs, a weaker US dollar, and any potential tariffs levied by the Trump administration on Taiwanese exports, or semiconductors more broadly.
• Microsoft continues to benefit from rapid adoption of AI, both by the company’s core customers and customers of OpenAI, since Microsoft Azure is the primary cloud platform powering OpenAI and ChatGPT.

Concluding Thoughts

Clearly, the current economic outlook is murky, but this is not necessarily cause for concern. We have navigated periods of great uncertainty before, and we know such periods often lead to uniquely attractive investment opportunities for strategies like ours.

As always, thank you for placing your trust in us to search for those opportunities on your behalf. Please do not hesitate to reach out with any questions.

Sincerely,

The Summitry Select Team

Note: This commentary reflects the opinions of Summitry, LLC and is for informational purposes only. Nothing herein constitutes investment advice or any recommendation that any particular strategy or security is suitable for any specific person. Past performance does not guarantee future returns. Investing involves risk and possible loss of principal capital. An index is a hypothetical portfolio of securities representing a particular market or market segment used as an indicator of the change in the securities market. Indexes are unmanaged, do not incur fees and expenses and cannot be invested in directly. The securities identified and described do not represent all of the securities purchased, sold or recommended for client accounts. The reader should not assume that an investment in the securities identified was or will be profitable.