Q1 - 2024: Letter to Investors

Dear Investor,

I am pleased to report that in Q1 of 2024, the NJC Horizon Fund achieved an exceptional 15.6% return, outperforming the S&P 500 and the Nasdaq by 53% and 78%, respectively. These indexes posted returns of 10.19% and 8.71%*. Our success this quarter was largely driven by core investments in healthcare, infrastructure, tech services, and notably, semiconductors.

NVIDIA, which comprises about 10% of our total holdings, was a standout within our portfolio, surging 82.5% in Q1. We continue to support this allocation, confident that NVIDIA’s potential for short and long-term gains outweighs the risk posed by near-term declines.

While buyers are eager to reduce their dependence on NVIDIA, growing demand is likely to offset the effects of substitution. The latest product releases show that NVIDIA’s competitors are further behind in AI offerings than we expected. While big buyers are creating their own chips for AI, it is likely that chips like NVIDIA’s will always provide the baseload of their AI computing power. Furthermore, we anticipate that any drop in NVIDIA’s demand will be well communicated because of the long lead times on datacenter orders, the robust financials of NVIDIA’s key customers, and the long history of conservative guidance from management.

Given this muted downside risk, our confidence is growing that NVIDIA can consolidate its leadership in AI. The benefits of NVIDIA's CUDA software platform appear to contribute more to customer retention than we initially perceived. Adding to this, the array of services and partnerships NVIDIA is rolling out positions the company to effectively convert its first-mover advantage into insurmountable market leadership.

Beyond our semiconductor holdings, several of our largest climate change related holdings also significantly outperformed markets in Q1. The growing scarcity and rising cost of fresh water continues to push water-hungry industrial and institutional customers to lean into EcoLab’s (~17%) chemical solutions. While growing demand for lower-carbon electricity and related infrastructure elevated prospects for Ecore Wire (up ~23%) and BWX Technologies (up 34%).

Eli Lilly (up 33.7%), another of our top-5 holdings, was also a significant contributor to our performance. Lilly’s value has soared along with sales of its GLP-1 agonist drugs, Mounjaro and Zepbound, which address weight and weight-related health conditions.

Our strong performance in the first quarter underscores our ability to identify and capitalize on opportunities that align with our investment thesis. We appreciate your continued trust and partnership, and we look forward to building on this momentum together. Thank you for your partnership as we advance towards a promising future.

Sincerely,
Nick Carpenter
Manager, NJC Horizon Fund

*As measured by the SPY and QQQ ETFs that mimic these markets.