- Portfolio outperformed the MSCI All Country World Index (ACWI) in Q3 despite high business quality metrics generally not being rewarded as shown below
- Positions in MercadoLibre, Amazon, and HDFC Bank contributed most positively to performance; positions in AIA Group, Steris, and Mengniu Dairy detracted most
- We sold the position in Walt Disney due to forced attrition and initiated a new position in Steris given the company’s strong quality characteristics and attractive growth opportunity
- We also trimmed positions in Amazon, MercadoLibre, Novo Nordisk, HDFC Bank, Danaher and Yum! Brands on strength, and added to positions in CP All, XP, AIA Group, Salesforce, Workday, Adobe, SAP, and FleetCor on weakness
- Higher interest rates are likely largely discounted in current stock prices, but a recession and its impact on corporate earnings is not yet factored into consensus earnings forecasts
- Coming downward earnings revisions for the index and eventual moderation of interest rate pressure should be a powerful tailwind to our relative performance in coming quarters as they have been historically (see MSCI ACWI 2-Year EPS % Change chart on Page 2)
The opinions expressed herein reflect the opinions of Sustainable Growth Advisers, LP and are subject to change without notice. Past performance is no guarantee for future results. This information is supplemental and complements a GIPS Report that can be found with composite performance. The securities referenced in the article are not a solicitation or recommendation to buy, sell or hold securities. This commentary is provided only for qualified and sophisticated institutional investors.
Results are presented gross and net of management fees and include the reinvestment of all income. The Net Returns are calculated based upon the highest published fees. The net performance has been reduced by the amount of the highest published fee that may be charged to SGA clients, 0.85%, employing the Global Growth equity strategy during the period under consideration. Actual fees charged to clients may vary depending on, among other things, the applicable fees schedule and portfolio size. SGA’s fees are available upon request and also may be found in Part 2A of its Form ADV. The largest contributors and detractors are determined using a ranking of the absolute contribution to portfolio return by each security held over the period under consideration. Upon request, free of charge, SGA can provide a list of all portfolio holdings held in SGA’s Global Growth portfolio for the year. Policies for valuing investments, calculating performance, and preparing GIPS Reports are available upon request. SGA’s earnings growth forecast data is based upon portfolio companies’ Non-GAAP operating earning.