- SGA’s U.S. Large Cap Growth portfolio returned 10.3% (gross) and 10.1% (net) in Q1 2017 compared to 8.9% for its primary benchmark the Russell 1000 Growth Index, and 6.1% for the broad market S&P 500 Index
- Equities generated their highest first quarter return in four years setting successive new all-time highs in the first half of the quarter, until optimism over the ability of the new administration to enact pro-growth policies began to slip in March with the inability of Republicans to repeal and replace the Affordable Care Act (ACA)
- Strong pro-cyclical value headwinds in Q4 2016 were replaced by broader large cap growth leadership; business quality factors were generally positive as companies with higher ROE’s, lower debt and earnings performed better; however, C and D ranked stocks outperformed those ranked A and B indicating returns were more stock specific
- Sector leadership was narrow with only the Technology and Consumer Discretionary sectors outperforming, while Energy stocks declined the most on concerns over building inventories and whether OPEC members would respect announced production cuts
- Strong stock selection particularly in the Consumer Discretionary and Technology sectors drove the portfolio’s outperformance; an overweight in Energy stocks detracted about 0.9%
- Amgen was sold to fund other more attractive growth opportunities while positions in Mondelez, Starbucks, UnitedHealth and others were added to and positions in Alphabet, Apple, Colgate-Palmolive and Lowe’s were trimmed on strength
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 full disclosure presentation 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, 0.75%, employing the U.S. Large Cap 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 performance record presented for periods prior to July 1, 2003 occurred before to the inception of SGA and represents the portable performance record established by two of SGA’s founders (and investment committee members) Gordon Marchand and George Fraise while affiliated with a prior firm. Policies for valuing portfolios, calculating performance, and preparing compliant presentations are available upon request. Upon request, free of charge, SGA can provide a list of all portfolio holdings held in SGA’s U.S. Large Cap Growth portfolio for the past year. SGA’s earnings growth forecast data is based upon portfolio companies’ non-GAAP operating earnings.