For the first quarter of 2020, the Navigator® All Cap Core U.S. Equity strategy had a return of -25.42% (-26.03% net) vs. a -20.90% loss in the Russell 3000 Index. Our positioning in Healthcare and Materials helped relative performance while our positioning in Information Technology and Consumer Discretionary acted as a drag in the first quarter of 2020.

Portfolio holdings in the Hershey Company and Amazon.com helped relative performance while holdings in Alaska Air Group and Continental Resources hurt performance. During the quarter, the strategy was overweight large-cap companies with market capitalizations above $15 billion. The value and quality characteristics of the All Cap strategy remain solid in comparison to the S&P 500 as it possesses a lower P/E of 15.8 vs. 16.6 and lower earnings variability combined with higher gross and net profit margins with similar business growth characteristics.

All Cap continues to focus on the highest quality companies throughout the U.S. market capitalization range from $2 billion to $1 trillion. As investors have indiscriminately sold many value and small/mid-cap companies without regard to their financial statements or business prospects over the first quarter (and last 3 years), we believe this strategy has a unique opportunity to benefit from a mispricing of these securities relative to their value in the past. As of mid-March, large-cap value stocks were trading at 4.5 standard deviations away from their normal relationship to the rest of the equity market. Similarly, small and mid-cap companies were trading at extreme long-term relative value discounts.

Top 5 Contributors

Ticker Quarter Ending March 31, 2020 Average Weight (%) Contribution to Return (%)
HSY Hershey Company 0.29 0.25
AMZN Amazon.com, Inc. 1.55 0.14
REGN Regeneron Pharmaceuticals, Inc. 0.36 0.1
MSFT Microsoft Corporation 2.8 0.07
UTX United Technologies Corporation 0.67 0.03

Top 5 Detractors

Ticker Quarter Ending March 31, 2020 Average Weight (%) Contribution to Return (%)
ALK Alaska Air Group, Inc. 1.47 -1.45
CLR Continental Resources, Inc. 0.91 -1.41
EAT Brinker International, Inc. 1.16 -1.16
PHM PulteGroup, Inc. 2.01 -1.07
JLL Jones Lang LaSalle Incorporated 2.34 -1.06
Source: Factset. For illustrative purposes only. Past performance does not guarantee future results. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients. In the chart above, “weight” is the average percentage weight of the holding during the period, and “contribution” is the contribution to overall performance during the period. To obtain the calculation methodology and a list showing every holding’s contribution to the overall composite during the period, contact: PortfolioAnalytics@ccmg.com.

The views expressed are those of the author(s) and do not necessarily reflect the views of Clark Capital Management Group. The opinions referenced are as of the date of publication and are subject to change due to changes in the market or economic conditions and may not necessarily come to pass. There is no guarantee of the future performance of any Clark Capital investments portfolio. Material presented has been derived from sources considered to be reliable, but the accuracy and completeness cannot be guaranteed. Nothing herein should be construed as a solicitation, recommendation or an offer to buy, sell or hold any securities, other investments or to adopt any investment strategy or strategies. For educational use only. This information is not intended to serve as investment advice. This material is not intended to be relied upon as a forecast or research. The investment or strategy discussed may not be suitable for all investors. Investors must make their own decisions based on their specific investment objectives and financial circumstances. Past performance does not guarantee future results.
This document may contain certain information that constitutes forward-looking statements which can be identified by the use of forward-looking terminology such as “may,” “expect,” “will,” “hope,” “forecast,” “intend,” “target,” “believe,” and/or comparable terminology (or the negative thereof). Forward looking statements cannot be guaranteed. No assurance, representation, or warranty is made by any person that any of Clark Capital’s assumptions, expectations, objectives, and/or goals will be achieved. Nothing contained in this document may be relied upon as a guarantee, promise, assurance, or representation as to the future.
The S&P 500 measures the performance of the 500 leading companies in leading industries of the U.S. economy, capturing 75% of U.S. equities.
The VIX Index is a volatility index derived from S&P 500 options, with the price of each option representing the market’s expectation of 30-day forward-looking volatility. The resulting VIX index formulation provides a measure of expected market volatility on which expectations of further stock market volatility in the near future might be based.
The Russell 2000 Index measures the performance of the 2000 smallest U.S. companies based on total market capitalization in the Russell 3000, whichrepresents approximately 11% of Russell 3000 total market capitalization.
The Russell 3000 Index measures the performance of the 3,000 largest U.S. companies based on total market capitalization, which represents approximately 98% of the investable U.S. equity market.
The volatility (beta) of a client’s portfolio may be greater or less than its respective benchmark. It is not possible to invest in these indices.
Index returns include the reinvestment of income and dividends. The returns for these unmanaged indexes do not include any transaction costs, management fees or other costs. It is not possible to make an investment directly in any index.
Past performance is not indicative of future results. This material is not financial advice or an offer to sell any product. Not every client’s account will have these exact characteristics. The actual characteristics with respect to any particular client account will vary based on a number of factors including but not limited to: (i) the size of the account; (ii) investment restrictions applicable to the account, if any; and (iii) market exigencies at the time of investment.
Clark Capital Management Group, Inc. reserves the right to modify its current investment strategies and techniques based on changing market dynamics or client needs. The information provided in this report should not be considered a recommendation to purchase or sell any particular security, sector or industry. There is no assurance that any securities, sectors or industries discussed herein will be included in an account’s portfolio. Asset allocation will vary and the samples shown may not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings. It should not be assumed that any of the securities transactions, holdings or sectors discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.
Clark Capital Management Group, Inc. is an investment adviser registered with the U.S. Securities and Exchange Commission. Registration does not imply a certain level of skill or training. More information about Clark Capital’s advisory services and fees can be found in its Form ADV which is available upon request. CCM-669

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