LRGE - ClearBridge Large Cap Growth ESG Strategy Q1 2024 Portfolio Manager Commentary

2024-04-18 09:40:00 ET

Summary

• ClearBridge is a leading global asset manager committed to active management. Research-based stock selection guides our investment approach, with our strategies reflecting the highest-conviction ideas of our portfolio managers.
• The Strategy outperformed due to a combination of active management of our mega cap exposure as well as strong stock selection across industrials and similar early-cycle companies.
• ClearBridge is closely watching sustainability-related opportunities presented by artificial intelligence as well as its energy intensity and social dimensions as the phenomenon plays out in our companies across sectors.
• Preparing for a range of outcomes is our rationale for diversifying across the growth buckets. As the economy straddles a potential recession or uptick in inflation, we want to own companies with different drivers that are able to perform through varying market conditions.

By Peter Bourbeau & Margaret Vitrano

Investing in AI for Sustainability and Growth - Market Overview

The positive momentum of 2023 extended into the first quarter as a likely economic soft landing and being past the peak of monetary tightening sent stocks broadly higher. The S&P 500 Index advanced 10.56% for its best start since 2019, boosted by solid corporate earnings and continued enthusiasm for generative artificial intelligence ((AI)). While the market showed some signs of broadening, mega cap growth stocks maintained their leadership with the Russell Top 200 Growth Index (11.70%) being the best performing segment for the quarter.

The likelihood of slowing economic growth and a more palatable rate environment going forward enabled growth stocks to maintain a premium over value stocks, with the benchmark Russell 1000 Growth Index rising 11.41% and outperforming the Russell 1000 Value Index by 242 basis points. Communication services (+17.34%) and information technology (IT, +12.68%) continued to outperform the benchmark, but more encouraging was greater participation in the quarter among utilities (+24.11%), materials (+13.56%), health care (+11.68%) and financials (+11.28%) stocks. While market performance remained top heavy, divergence began to emerge among the Magnificent Seven (Alphabet ( GOOGL ), Amazon.com ( AMZN ), Apple ( AAPL ), Meta Platforms ( META ), Microsoft ( MSFT ), Nvidia ( NVDA ) and Tesla ( TSLA )), a basket of mega cap growth stocks that led the concentrated equity rally in 2023. The group constitutes 48% of the Russell 1000 Growth Index while the ClearBridge Large Cap Growth ESG Strategy maintains exposure in the mid-30 percent range. This underweight enables us to own good businesses outside the group, like electrical components' maker Eaton ( ETN ), and maintain a portfolio diversified across the select, stable and cyclical growth companies we target....

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