We increased our exposure to high-quality software stocks on weakness. In addition, we leaned into emerging trends in online gaming and social video. We funded these purchases by selling internet stocks that appear to have limited upside potential. In addition, we further reduced our semiconductor allocation due to our bearish medium-term assessments.

Software

We trimmed or exited positions that appear to have limited immediate upside potential in favor of companies that continue to grow market share and are led by strong management teams.

• We reduced our position in Workday, a leader in enterprise human capital software, as it continues to work on its plans for penetrating other enterprise segments. Given its track record for innovation, strong competitive position, and large addressable market, we believe Workday should produce durable, long-term growth.
• We trimmed Zendesk to rebalance risk/reward attributes in our position. Zendesk is a cloud-based customer service software developer. We believe Zendesk's market position and commitment to innovation create a long runway for robust revenue growth as its solutions gain traction and attract larger enterprises across multiple channels such as email, chat, voice, and even customer relationship management.
• We added to our position in HubSpot, a company that provides cloud-based marketing and content management solutions to small and mid-size businesses. In our view, HubSpot should continue to benefit from its strong management team and the trend toward process digitization across enterprises.
• We added to our position in Atlassian, a leading provider of on-premises and cloud-based workflow and collaboration software. We expect Atlassian to benefit as software and application developers become increasingly important at enterprises of all sizes and see the potential for its collaboration and project management tools to gain further traction outside the IT department. In addition to Atlassian's long growth runway, we also value its sales efficiency.

Internet

We trimmed or exited e-commerce and social media stocks, consolidating our bets while rebalancing risk and reward. Also, we added new names that provide the potential for new growth.

• While we appreciate Alibaba's leadership role in China's e-commerce and cloud computing markets, we exited our position at this time to focus on other, more promising investment opportunities within the Asian tech sector.

• We eliminated DeliveryHero, a leading global online delivery platform. While we appreciate the company's leading position in many of the markets in which it operates, we chose to invest in other, more strategic relative values at this time.
• We added to our position in Etsy, an online marketplace for unique, creative, and often homemade goods. We believe the company has a very large total addressable market, including its opportunities outside the U.S., and is currently underestimated by the stock market. Even though it may be dilutive to profits in the short term, we think its recent purchase of Depop, a fashion resale marketplace catering to Gen Z buyers, will add to its growth runway over the long term.
• We established a new position in Bilibili, a Chinese social video platform backed by tech giants Tencent Holdings and Alibaba Group Holding, offering users a platform for short-form video content. We anticipate that its stock price will be driven by increases in monthly active users and in advertising revenues. First-quarter results were encouraging, and our thesis is on track.
• We bought additional shares of Coupang. We believe this leading South Korean e-commerce company can leverage its wide moat in logistics technology to offer consumers better product selection, faster shipping, and lower prices than many of its competitors and, in doing so, continue to grow its market share. We also find value in Coupang's large and increasing scale, which should benefit its profitability over time.

Semiconductors

As the relative value of semiconductor stocks continued to wane, we further pared our allocation to this subsector.

• We liquidated our position in Infineon Technologies, a leading maker of automotive and industrial semiconductors based in Germany. Our perceived risk in holding shares outweighed potential reward.
• We exited MediaTek, a fabless semiconductor design house. Our thesis played out and we believe its shares are now fully valued by the market. We project that the 5G market will grow more competitive as supply constraints ease later this year.
• Micron Technology, a U.S.-based leader in memory and storage, was eliminated from the portfolio to invest in other, less cyclical opportunities within the subsector.

Media & Entertainment

We reduced positions that face strong competitive risks while looking for opportunities to further support high-conviction names.

• Given disappointing net subscriber additions, we trimmed Netflix throughout the period in an attempt to rebalance risk and reward. Overall, we like the company's business strategy and large addressable market.
• We added to our position in ROBLOX as its price peaked during the period. We are attracted to the firm's sophisticated developer base and technological capabilities along with the powerful social network effects ROBLOX utilizes in drawing in new active users.

Financial Services

We reduced our positions in global payment brands which are now underweighted. While we like their steady returns and leverage to the reopening, we redeployed the capital to other, potentially higher-growth opportunities.

• We trimmed our position in MasterCard to fund new investment opportunities. MasterCard is an electronic payment brand that owns the second largest payment switch connecting banks and merchants across the globe. We like its steady earnings growth, wide moat, and the strong levels of free cash flow it generates.
• We sold shares of Visa to invest in other stocks. We still like its exposure to global travel, secular growth prospects in electronic payments, and high margins.
• We trimmed our holding in Square, a point-of-sale, mobile payment service provider. We see value in the synergies that the firm is building across its small and mid-sized businesses and Cash App segments.