1Q2019 – U.S. Small Company Growth Commentary

  • During Q1 2019, the Polen U.S. Small Company Growth Composite Portfolio (the “Portfolio”) returned 14.62% gross of fees. This compares with a return of 17.15% for the Russell 2000 Growth Index (the “Index”) in the same period. For the trailing 12-month period, the Portfolio returned 15.33% gross of fees, versus the 3.87% posted by the Index.
  • We believe the fundamentals of our companies remain very healthy. For the most recent trailing twelve months, they have delivered 15% revenue growth on average, with 31% earnings growth and 27% free cash flow growth. 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 just over 19%–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.