- SGA’s U.S. Large Cap Growth portfolio returned 2.1% (gross) and 1.9% (net) in Q3 2017 compared to 5.9% for its primary benchmark the Russell 1000 Growth Index, and 4.5% for the broad market S&P 500 Index
- Equities generated attractive absolute returns in a market where stock dispersion (cross sectional volatility) returned to the lowest levels since the inception of the U.S. portfolio, and signs of investor complacency were reflected in the VIX approaching historically low levels
- Higher beta large cap growth stocks within the Russell 1000 Growth Index with higher quality business characteristics generally outperformed; Utilities (+48.8%) and Telecom (+11.2%) which have miniscule weights in the Index were the strongest performing sectors
- Technology (+9.4%), Financials (+7.6%), and Industrials (+7.5%) performed next best and Energy stocks rebounded strongly as oil prices rose 12% for the quarter; Consumer Staples were weakest (-2.5%)
- Performance was negatively impacted by the reallocation of capital to holdings which presented more attractively valued growth opportunities across our 3-5 year investment outlook such as Chipotle Mexican Grill and Nike, the outperformance of stocks not owned (and in many cases not on our Qualified Company List), and decisions to trim strongly performing positions which had become less attractive from a valuation standpoint
- Stock selection particularly in the Consumer Discretionary sector, but also in Technology and Health Care detracted most from performance; sector allocations detracted due to an overweight to the weakly performing Consumer Discretionary sector and an underweight to the strongly performing Industrials sector
- Holdings in Kansas City Southern and Whole Foods Market were sold on strength to fund positions in TJX Companies and Ulta Beauty while positions in Chipotle Mexican Grill and Nike were added to on weakness and positions in ADP, Amazon, Facebook and J.B. Hunt were reduced 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.