4Q2024 - U.S. SMID Company Growth Commentary
While volatility and narrowly defined, crowded trades in the Index have presented short-term challenges for our high-quality, concentrated Portfolio, we believe these dynamics create an excellent environment for stock pickers like us with a long-term, business-owner mindset.
- The U.S. SMID Company Growth Composite Portfolio delivered 3.0% gross of fees and 2.7% net of fees for the quarter, slightly outperforming the Index. This marked the end of an overall disappointing year in which the Portfolio returned 2.6% gross of fees and 1.4% net of fees, underperforming the Index’s 13.9% return.
- The top contributors to the Portfolio’s relative and absolute performance in the fourth quarter were Revolve Group, Warby Parker, and Goosehead Insurance.
- The most significant detractors from relative performance were Booz Allen Hamilton, TopBuild, and Hamilton Lane. The significant absolute detractors were Booz Allen Hamilton, TopBuild, and Floor & Décor.
- We initiated positions in Rambus, Entegris, Bentley Systems, Insight Enterprises, Pure Storage, Willscot Holdings, and Dutch Bros. We also added to several existing positions.
- We eliminated our positions in Euronet Worldwide, Aspen Technology, Fox Factory Holdings, Tyler Technologies, Clearwater Analytics, and Alarm.com, and trimmed several existing positions.
- There are many examples of high beta, AI-adjacent growth companies outperforming the broader investable universe. While we did not own these stocks due to their low quality, we believe the Portfolio is well-positioned to benefit from the GenAI-driven transformation—albeit in a more sustainable, long-term-oriented manner.