- SGA’s U.S. Large Cap Growth portfolio returned -3.6% (gross) and -3.8% (net) in Q4 2016 compared to 1.0% for its primary benchmark the Russell 1000 Growth Index, and 3.8% for the broad market S&P 500 Index.
- Stock indexes hit successive new all-time highs following the surprise election of Donald Trump and expectations for more pro-business policies and better U.S. economic growth.
- SGA’s investment approach faced intense headwinds as smaller cap, lower quality, cyclical companies in the industrial and financial services sectors outperformed; investors looked to include more economic sensitivity into their portfolios with reports of stronger economic data and hopes for stimulative policies from a Trump administration.
- UnitedHealth was added to the portfolio to capitalize on its ability to bring an integrated healthcare, pharmacy and insurance solution to a post Affordable Care Act (ACA) health care market where cost savings are key.
- SGA’s performance was negatively impacted by disappointing quarterly reports from Cerner, FleetCor and Red Hat, and the significant post-election shift toward industrial cyclicals, banks and energy stocks.
- Underperformance from the market’s capitalizing of
hope presents an attractive opportunity for sustainable growth moving forward as actual changes may be less dramatic than what is currently discounted.
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.