4Q2023 - U.S. Small Company Growth Commentary

We are cautiously optimistic about stabilizing interest rates as uncertainty persists.

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  • During the fourth quarter, the U.S. Small Company Growth Composite Portfolio (the “Portfolio”) trailed the Russell 2000 Growth Index (the “Index”).
  • The market experienced yet another drastic shift into the end of the year with growing evidence the rate hike cycle was nearing an end, and a growing consensus expectation for easing financial conditions in 2024.
  • Since the most recent low in October, the Russell 2000 Growth has outperformed the broader market by over 8% and small cap stocks remain historically cheap relative to history and to large cap peers.
  • Transaction activity this quarter included six new positions—Core & Main, Medpace, Generac, LGI Homes, Topgolf Callaway Brands, and Bowman Consulting Group—along with modest additions and trims to existing holdings. We exited one position—Five Below—during the quarter.
  • We favor businesses with robust free cash flow, persistent growth, and high returns on capital, and we always seek to own companies that we believe are undervalued relative to their long-term compounding potential. As always, we believe that maintaining our focus on high-quality growth companies that are well-positioned to drive cash flow and earnings growth over the next five years will generate long-term performance.

Read the full commentary and disclosures here

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