1Q2021 – Focus Growth Commentary

Re-opening trades, vaccines, and interest rates are all very interesting. But, in our experience, long-term investment returns are driven by sustainable earnings growth.

  • During the first quarter of 2021, the Polen Focus Growth Composite Portfolio (the “Portfolio”) returned 1.81% gross of fees versus 0.95% for the Russell 1000 Growth Index (the “Index”) and 6.18% for the S&P 500.
  • So far this year, the various companies categorized as “COVID winners” in e-commerce, digital transformation, and other secular growth spaces have generally underperformed “COVID losers” such as oil and gas companies, airlines, and brick-and-mortar retailers.
  • Though rising interest rates have made headlines recently, the earnings growth we expect from the Portfolio’s holdings could more than overcome valuation compression and provide a potential path to satisfactory returns.
  • We calculate the overall earnings per share growth of the Portfolio was just under 10% in 2020, while according to S&P Global, S&P 500 earnings per share declined over 20%, a 30+ percentage point spread.
  • Over the long term, we continue to expect that the Portfolio’s earnings per share growth will be in the mid-teens range and earnings per share growth for the S&P 500 will be in the mid-single-digit range, as it has been historically.
  • We added new positions in Amazon and Netflix and added to our position in Salesforce.com. We eliminated our positions in Dollar General and Regeneron. We slightly trimmed Autodesk, MSCI, PayPal, Alphabet and Align, in each case, to help fund other purchases.

Read the full commentary here →