- In Q4, the portfolio posted a strong absolute return of 13.9% (Gross) and 13.7% (Net) versus 14.2% for the Russell 1000 Growth Index and 11.7% for the S&P 500 Index.
- For the year, the portfolio returned 30.3% (Gross) and 29.3% (Net) versus 42.7% for the Russell 1000 Growth Index and 26.3% for the S&P 500 Index.
- Russell 1000 Growth Index returns for the year were heavily skewed by the strong outperformance of the “Magnificent 7”, the largest stocks in the Index which accounted for 65% of the return for the year.
- The business quality characteristics we seek in companies (pricing power, recurring revenues, and less debt) performed better during the quarter providing a more favorable investment environment although companies with high gross margins and stable sales growth were not rewarded for the year.
- The largest contributors to Q4 performance were Microsoft, Amazon, and Workday, and the largest detractors were Aon and Regeneron; Novo Nordisk was the smallest contributor.
- A new position in Novo Nordisk was initiated and we sold the portfolio’s position in Regeneron.
- We trimmed positions in ServiceNow, Workday, and Salesforce on strength during the quarter and reallocated capital to positions in Danaher, CPKC, Autodesk, and UnitedHealth on weakness.
- Portfolio revenues and earnings are expected to grow by 11% and 16%, respectively, over the next three years consistent with historic levels.
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.