We believe that now is the time when a disciplined, unemotional approach is more important than ever. Heading into last week’s sell-off, Clark Capital’s portfolios were positioned favorably. By late February, both our top-down, quantitative and bottom-up, fundamental strategies had taken measures to reduce risk.
Here are a few things that worked in your clients’ favor:
- We reduced our positions in airlines and airports as well as financials.
- We reduced our exposure to high yield bonds.
- We maintained an overweight position in cyclical growth sectors such as Technology and Consumer Discretionary. Historically, after a significant decline in rates, these areas of the markets provide the strongest relative returns.
As active managers, we are making informed investment decisions that are guided by our disciplined investment methodologies. Here are a few changes we have implemented in our portfolios for your clients at the strategy level.
Clark Capital’s Top-Down, Quantitative Strategies
Navigator® Fixed Income Total Return
- The strategy now is 100% allocated to the short end of the Treasury curve, with a duration of about 2 years.
- We have been systematically de-risking the portfolio over the past weeks, as the models that guide the strategy first positioned us in 50% in high yields and 50% Treasuries while high yields held up. On March 9th, the portfolio shifted to 100% Treasuries.
- The fixed income portion of this strategy is comprised of Fixed Income Total Return (see above for update). The equity allocation of the portfolio is concentrated in large-cap growth.
Navigator® Global Tactical
- The strategy follows the Fixed Income Total Return models’ signal and was de-risked in the same fashion.
Clark Capital’s Bottom-Up, Fundamental Strategies
We have been cutting back on travel-related names since January and have added to some defensive Consumer stocks, including household and personal products along with a discount retailer. In the Healthcare sector, we’ve added defensive positions.
Navigator® All Cap Core U.S. Equity
- We are managing the strategy according to our investment philosophy of buying high quality companies that are undervalued with business momentum.
- We reduced our exposure to restaurants and restaurant related companies and added a position in Healthcare.
- The portfolio holds a large position in Technology.
Navigator® High Dividend Equity
- The strategy invests in companies that are consistent earnings and dividend growers. These are the types of companies that we believe will come out the other side of this in pretty good shape.
- The portfolio recently added a medical equipment company and a property and casualty insurance company. The portfolio is well positioned in defensive sectors, and underweight energy and materials.
Fixed Income: Clark Capital’s Individual Bond Portfolios
- Investment grade corporate debt has been hit hard over the past couple of days. The last time we saw this was December 24th, 2008.
- We are buying municipal bonds at 120-200% of Treasury yields. Normally, municipals trade 60%-80% of Treasuries, depending upon where they are on the yield curve.
- On March 12th, we bought pre-refunded bonds funded in Treasuries (tax-free Treasuries, at 200% of Treasury yields). In our opinion, this represents a total dislocation of the marketplace.
- We have used the market weakness to accelerate this year’s tax transitions and take losses in an effort to deliver better tax outcomes to your clients.
As always, we believe that the surest way for clients to achieve financial success is to remain focused on their long-term goals and objectives. Clark Capital is committed to helping you and your clients navigate these changing and challenging market conditions.
The S&P 500 Index is a stock market index that tracks the stocks of 500 large-cap U.S. companies.
The Russell 1000 Growth Index measures the performance of those Russell 1000 Index companies with higher price-to-book ratios and higher forecasted growth values.
The Russell 1000 Value Index measures the performance of those Russell 1000 Index companies with lower price-to-book ratios and lower forecasted growth values.
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.
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.
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