Highlights:
- The portfolio returned -3.8% (Gross) and -4.0% (Net) versus -3.1% for the Russell 1000 Growth Index and -3.3% for the S&P 500 Index.
- Companies with higher sales stability underperformed amid rising interest rates.
- The largest contributors to Q3 performance were Regeneron, Intuit, and MSCI and the largest detractors were Dollar General, Netflix, and Microsoft.
- A new position in Canadian Pacific Kansas City was initiated and we sold positions in Adobe and Intuitive as we managed valuation risk; Dollar General was sold given deterioration in its fundamentals.
- We trimmed the position in Alphabet on strength and added to positions in Microsoft, Netflix, NVIDIA, Yum! Brands, UnitedHealth, and Danaher on weakness.
- Portfolio revenues and earnings are expected to grow by 10.8% and 16.1%, respectively, over the next three years consistent with historical levels.
- Consensus expectations for 14.5% earnings growth for the Russell 1000 Growth Index over the next 3 years presume an acceleration despite mounting evidence of a gradual slowing in macroeconomic and profit growth.
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, 0.75%, 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. SGA U.S. Large Cap Growth Composite inception revised to 7/1/2003 from 4/1/2000 due to SEC New Marketing Rule change relating to use of predecessor performance record. 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. Policies for valuing investments, calculating performance, and preparing GIPS Reports 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.