Large Cap Value SMA Top Performance in 2025

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Chris Davis:Today I'd like to take a few minutes of your time and talk about our Large Cap Value Separately Managed Account.

Separately Managed Accounts has been a core part of our firm and it's through Separately Managed Accounts that we've cemented the deep partnership we have with so many financial advisors.

We were one of the first equity SMAs available to advisors a long time ago. Now let's talk a little bit about the results.

What's important to realize is that in offering our SMAs to advisors, we have been able to outperform the benchmarks in all time periods.

That is part of our relationship with advisors is to try to provide a strong service for your clients. So, how have we achieved these results?

Well we've done it with the core tenets and the key attributes of our firm.

Many of you have been invested with us for decades, and we have decades working together as a team here. That means we've been able to navigate successfully all different types of market and economic environments, booms and busts, recessions, contractions, crises, but also bubbles and manias, being able to navigate through all different types of weather together. We do this with a highly selective and a truly active, actively managed portfolio.

We're not benchmark huggers. We don't think you can achieve something different from everybody else by looking like everybody else. We're willing to go against the crowd seeking the best opportunities across all sectors and industries.

This is a true stockpickers portfolio. We have a time-tested, what's called a "relative value" investment approach that distinguishes us from what we think of as deep value or growth or some of the other categories that are out there.

But what that means is we recognize that if we want to own businesses that can compound over the long term, we have to answer two questions: What sorts of businesses do we want to own and how much do we pay for them. The first is about a focus on quality.

We're seeking durable, growing businesses that generate strong, free cash flow that have resilient balance sheets that have deep moats and competitive advantages and are run by experienced and proven leaders.

But the second question is just as important. That's the hallmark of our valuation discipline. How much over is that we simply won't chase growth.

We are not momentum investors. We are value investors and that valuation discipline remains a core tenant of our approach. The final attribute that I think is always important for advisors to bear in mind is this deep alignment of interests.

We are among the largest shareholders in our investment strategies. Our partners, my colleagues, our families, we are invested side by side with your client.

And that means we remain steadfastly focused not just on returns, but also on risk because it's our money invested alongside yours.

So let's talk a little bit about the drivers of returns in recent years. We've had a wonderful move at last in the financial services sector.

But we are not sector investors. We are highly specific and we are focused only on a handful of financials that we think are deeply competitively advantaged and those have really outperformed, not just the market but have also outperformed the Financial Services sector and we think they have a lot of runway to go.

In the technology sector where there's so much attention, again, and see activity as the key. We're focused on those companies that have entrenched customer bases, resilient cash flow, the ability to invest and are run by leaders that are proven capability to make those pivots and make those investments. But we're also invested in technology companies that are a little bit out of the spotlight. We think of these as the providers of "picks and shovels" in this AI gold rush.

So, they are companies that have long records of resilience and durability, and they aren't necessarily the ones in the spotlight, but boy, they've been compounding machines.

And then, opportunistic investments in Healthcare. We know this is an attractive sector, but again, we don't want the hot product.

We don't want the boom and bust. We want the resilient services providers and the resilient providers of the necessary components to healthcare spending, not just the bright, shiny objects of the current trends.

When we think about our positioning, not just looking backwards but looking ahead, there's probably the most important data I can share with you is shown here.

It's that we are by being highly selective, only owning 25 to 30 companies. We've been able to build a portfolio of companies that combined the best of both worlds.

What we used to call a "value investor's dream," companies that have durable growth, but yet are also trading at a steep discount to the averages.

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