4Q2018 – U.S. Small Company Growth Commentary

  • During the fourth quarter of 2018, the Polen U.S. Small Company Growth Composite (the “Portfolio”) returned -15.55% gross of fees. This compares with a return of -21.65% for the Russell 2000 Growth Index (the “Index”) in the same period. Global markets were under considerable pressure throughout the entire quarter.
  • We believe the fundamentals of our companies remain very healthy. For the trailing twelve months, they have delivered 18% revenue growth on average, with both strong earnings and cash-flow conversion. Return on invested capital (ROIC), which is the key metric we look at to capture the health of the businesses, has remained stable over the past 18 months at near 20% — this is exceptional relative to the broader small capitalization universe where average ROIC is negative. Company balance sheets remain strong as well, with 18% debt to total capital on average, and improving efficiency metrics. All of these metrics compare favorably to the Russell 2000 Growth universe, where a high percentage of businesses are unprofitable and have highly levered balance sheets.

Read the full article here.