1Q2024 - U.S. Small Company Growth Commentary
We remain focused on high-quality growth companies well-positioned to drive cash flow and earnings growth.
Read the full commentary and disclosures here
- In the first quarter, the Polen Capital U.S. Small Company Growth Composite Portfolio (the “Portfolio”) returned 1.42% gross and 1.11% net of fees compared to 7.58% for the Russell 2000 Growth Index (the “Index”), and 4.77% for the S&P SmallCap 600 Growth Index.
- It was a historic quarter for the Russell 2000 Growth Index as two companies, Super Micro Computer and MicroStrategy, drove more than half the Index returns. Super Micro, provider of high-performance, energy-efficient servers, was up over 250% and is now at a nearly $60 billion market cap. Crypto-driven MicroStrategy was up over 170% and approaches a $30 billion market cap. Both companies will leave the Index with the June rebalancing.
- We see ourselves in essentially the same environment that we noted last quarter. In late 2023, it became clear that interest rates had peaked, precipitating a bottom in the Russell 2500 Growth Index on October 27, followed by a rally that can generally be considered lower quality. The high-quality nature of our Portfolio was a headwind in the final months of 2023, a trend that continued into the first quarter.
- There were no new portfolio positions in the first quarter. We added to existing positions in AMN Healthcare, Progyny, SiTime, Clearwater Analytics, Generac, and EXL Service Holdings. We trimmed our positions in Wingstop and Houlihan Lokey. We eliminated our position in Bumble.
- We favor businesses with robust free cash flow, persistent growth, and high returns on capital. We consistently aim to own companies that we believe are undervalued relative to their long-term compounding potential. As always, we believe maintaining our focus on high-quality growth companies well-positioned to drive cash flow and earnings growth over the next five years will generate long-term performance.
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