- SGA’s U.S. Large Cap Growth portfolio returned 1.2% (gross) and 1.0% (net) in Q1 2018 compared to 1.4% for its primary benchmark the Russell 1000 Growth Index, and -0.8% for the broad market S&P 500 Index
- The quarter incorporated two distinct periods with January and February being led by higher price momentum stocks despite a brief 10% correction, followed by a major decline in Technology and related stocks in March; the portfolio underperformed when price momentum was rewarded but outperformed amid market weakness capturing just 88% of the downside and ranking in the 7th percentile of the Lipper Large Cap Growth Universe
- Increasing inflationary expectations and fears over higher than expected interest rates combined with growing concerns over protectionist policies in the U.S. and the potential for increased regulatory oversight in parts of the social media industry put pressure on stocks and caused a spike in market volatility
- Smaller-cap growth companies with higher betas performed best; the return to business quality was mixed with low return on equity companies and those with no earnings outperforming, but those with lower debt also doing well
- The Financials and Consumer Discretionary sectors performed best in Q1, but Technology led for most of the quarter until facing intense selling pressure in March; weakness in Telecommunications, Energy, Materials and Consumer Staples negatively impacted market returns
- Positions in Core Labs, Chipotle Mexican Grill and Cerner were sold and new positions in Praxair and Becton Dickinson were initiated; positions in Facebook, Red Hat, Core Labs and others were reduced on strength and positions in Walt Disney, Regeneron, Equinix and Alphabet among others were added to on weakness
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.