We used the broad-based sell-off in equities to lean into investment ideas that we believe offer compelling risk/reward profiles, with an emphasis on names that should survive the coronavirus pandemic and associated economic contraction and emerge in an even better competitive position for the long term. These moves involved leaning opportunistically into investments that we believe could benefit from an acceleration in key secular trends and buying high-quality names that the market had punished because their underlying businesses face significant near-term risks.

Software

We continue to regard the business models and growth runways available in cloud-based enterprise software as some of the most compelling over the long term. Broadly speaking, we leaned into investment ideas where we see the potential for existing secular trends to accelerate while paring names that could face sales disruptions in the near term.

• We initiated a position in Avalara, a company that specializes in cloud-based software that calculates customers' sales tax obligations across U.S. states and counties as well as international markets. We believe that, as a leader in its field, Avalara should benefit from continued growth in e-commerce.
• We added to Shopify, which provides an online commerce platform for small to mid-size businesses. In our view, Shopify stands to benefit from the secular transition to e-commerce, a long-term trend that behavioral shifts stemming from the coronavirus outbreak could accelerate. We recognize that the company could face challenges as some of its customers face existential threats from supply-side disruptions and reduced demand. Regardless of the potential for near-term pain, we believe that a vibrant ecosystem of small to mid-size businesses should remain an important part of the economy on the other side of this crisis and that these operations increasingly will want to sell their goods and services online.
• We trimmed ServiceNow and Salesforce.com, with the bulk of these sales occurring prior to the sharp sell-off in equity markets. Although we acknowledge that both companies could experience near-term sales disruptions because of the coronavirus outbreak, we expect their cloud-based platforms to benefit over the long term as enterprises accelerate their digital transformations to enhance business continuity and competitiveness.

Internet

Our internet holdings focus on platform companies that we believe have significant competitive advantages and compelling long-term growth prospects. Although we reduced the portfolio's overall exposure to internet stocks, we took advantage of broad-based weakness to increase our number of holdings in this subsector.

• We pared Tencent Holdings and Alibaba Group Holding, the dominant e-commerce player in China. Nevertheless, we remain confident in these internet giants' long-term growth stories, as their core businesses benefit from powerful secular trends and they continue to leverage their popular platforms' network effects to pursue adjacent opportunities.
• We trimmed Facebook. We acknowledge that coronavirus-driven macroeconomic weakness is likely to weigh on near-term demand for Facebook's online advertising solutions, especially among small to mid-size businesses. Nevertheless, we expect the economic downturn to strengthen Facebook's competitive position relative to traditional advertising outlets and believe our investment thesis remains intact. We continue to monitor regulatory developments and recognize that news on this front could increase volatility in Facebook's stock.
• We initiated a position in Trip.com (formerly Ctrip.com International), China's dominant online provider of travel services. The stock sold off sharply, as the coronavirus outbreak in China and other countries depressed demand for domestic and international travel. Near-term challenges aside, we value Trip.com's potential to compound free cash flow over the long haul as demand for travel grows with household incomes in China.

Semiconductors

We refined the portfolio's semiconductor positioning. We recognize that semiconductor companies' financial results likely will take a hit from demand uncertainty and supply chain disruptions in the near term. At the same time, low inventories after last year's downcycle suggest that key segments of this subsector should benefit when economy activity eventually recovers. Over the long term, we believe the secular trend of increasing demand for advanced chips in data centers, artificial intelligence, automobiles, and industrial end markets remains intact.

• We exited Texas Instruments, a leader in analog semiconductors, and Marvell Technology, a digital semiconductor company that specializes in storage controllers, ethernet switches, and enterprise connectivity.
• We started a position in Infineon Technologies, a global leader in power semiconductors. Although the company's financial results should take a hit in the near term from severe weakness and disruptions in the automotive end market, we expect the company to benefit over the long term from several tailwinds, including growing adoption of renewable energy, the increasing electrification of vehicle subsystems, and the ever-expanding internet of things.
• We added to Applied Materials, a leading supplier of semiconductor capital equipment. In our view, Applied Materials should benefit over the long term as customers step up spending to meet demand for memory chips and drive innovation in logic chips. We believe the market does not appreciate the company's growth prospects once the recovery cycle takes hold in key semiconductor markets.

Financial Services

We increased the portfolio's position in this subsector opportunistically, focusing on names that offer exposure to growth in online and mobile payments as e-commerce continues to take share. Near-term uncertainties aside, we believe that the lasting behavioral shifts driven by the health crisis could accelerate the uptake of electronic payments and online shopping.

• We added to Visa and MasterCard. We like the companies' leverage to the transition away from cash to electronic payments as e-commerce continues to grow. We also value the business models' pricing power and capacity to generate free cash flow.
• We initiated a position in Adyen, a European company that boasts an experienced management team and has developed, in house, what we regard as one of the best payment processing platforms available. An appealing fee structure and superior technology that results in fewer rejections and real-time access to sales data should enable the company to take market share while benefiting from secular shifts toward digital payments and mobile e-commerce.