Section Hero Funds

Growth Fund

Growth Fund

2Q20 Commentary1

Globally, equity markets experienced strong gains as economies began to re-open and economic stimulus packages were implemented. Domestically, the NASDAQ Composite Index2 rose +30.95% and led the way as investors sought exposure to companies benefiting from a substantial increase in the number of workers working from home, and the general population's spending significantly more time at home. The S&P 500 Index2, which includes exposure to airlines, cruise lines, and other economic cyclical stocks, lagged the NASDAQ but still managed to post a strong absolute return of +20.54% during the period. In local currency, European (the MSCI Euro Index2) and Chinese (MSCI China Index2) equities rose +16.84% (in local currency) and +15.29%, respectively. Treasury markets were relatively quiet, with the yield on the U.S. 10-year Treasury Note dropping a single basis point off of its historically low March level. We did witness some strength in the corporate high-yield debt market after the Fed began buying corporate bonds and bond ETFs. Energy markets also bounced back after tremendous volatility and a steep decline during the first quarter as the price of West Texas Intermediate crude oil skyrocketed +97% after briefly plunging into negative territory for the first time in history.

The national employment situation remains a key focus for policymakers and investors alike. In the beginning of the quarter, we witnessed unprecedented levels of job losses, illustrated by several consecutive weeks in which weekly jobless claims exceeded 2 million and the unemployment rate reached nearly 15%. Financial markets seemed to predict an improvement in these figures near the end of the quarter, later confirmed by the June non-farm payrolls number released on July 2, which indicated some bounce-back in key data. Specifically, non-farm payrolls rose by 4.8 million, easily the largest single-month gain in U.S. history, which reduced the unemployment rate to 11%, a lower rate compared to the peak since the crisis began, although still significantly elevated.

As we progressed through the quarter, we witnessed more governmental stimulus as Congress passed another bill which includes $310 billion in new funds for the Paycheck Protection Program, $60 billion dedicated to small business loans, $75 billion in grants to hospitals dealing with COVID-19 patients, and $25 billion dedicated to medical testing. All in all, the various stimulus packages, including Federal Reserve actions adding market liquidity through debt purchases and other support, to-date total several trillion dollars, indicating both the severity of the shutdown and the willingness of the U.S government to do whatever it believes to be necessary to support the economy. 

Investors also took note of the supportive stance communicated by relevant policymakers going forward. Chairman of the Federal Reserve Board Jerome Powell, speaking in May, said the fundamentals of the U.S. economy remain strong while acknowledging the novel coronavirus posed risks to growth. Similar to fiscal policymakers, he re-iterated that the Fed will continue to use its tools to “do whatever is necessary to support the economy.” In addition, although nothing has been formally announced, it appears another stimulus package is likely to arrive from Congress prior to the August recess.

On the health care front, Gilead Sciences' antiviral drug Remdesivir showed positive data surrounding its efficacy in treating infected COVID-19 patients. According to a report, a hospital using Remdesivir saw rapid improvement in symptoms among many of its COVID-19 patients. Shortly after the report was issued, U.S. regulators gave the drug emergency use authorization. In addition to Gilead, a host of other health care and pharmaceutical companies are racing to bring various COVID-19 treatments to market, such as Dexamethasone, or are developing a COVID-19 vaccine. We are starting to see the success of the efforts of the scientific community in response to the pandemic.

In terms of market capitalization, large cap stocks lagged small cap stocks in the quarter, as the Russell 10002,3 and Russell 20002,3 indexes posted quarterly returns of +21.82% and +25.42%, respectively. A significant gap of outperformance was present among investment styles as growth stocks were clearly in favor. The Russell 1000 Growth2,3 and the Russell 1000 Value2,3 indexes posted quarterly returns of +27.84% and +14.29%, respectively.


The Marsico Growth Fund posted a return of +33.82% for the second quarter and strongly outperformed its benchmark, the S&P 500 Index, which returned +20.54%.

 

Primary Contributors5An overweight allocation and strong stock selection in the Information Technology and Consumer Discretionary sectors4, two of the strongest-performing sectors of the benchmark index, had the largest positive impact on performance in the quarter. Stock selection was also strong in the Communication Services sector contributing positively to returns. The Fund maintained zero exposure to the weakest-performing sectors of the benchmark index, Utilities and Consumer Staples, boosting results.

 

Primary Detractors5: The Fund incurred a slight opportunity cost by maintaining an average cash position of approximately 3%, while the benchmark index returned +20%. The cash position at the end of the quarter was approximately 4%. The Fund maintained zero exposure to one of the stronger-performing sectors of the benchmark index detracting from performance. 

 

 

For more information, please click here for the Marsico Growth Fund Quarterly Investment Update.


1 Performance data quoted represents past performance. Past performance is no guarantee of future results. A Fund's performance, especially for short time periods, should not be the sole factor in making an investment decision. Please keep in mind that our views on investments discussed herein are subject to change at any time and the holdings represented here do not represent all of the securities purchased, sold, or recommended by Marsico Capital Management, LLC ("MCM"). Certain less-material factors may not be presented.

2 The S&P 500 Index is a registered trademark of S&P and is an unmanaged broadly-based index of the common stock prices of 500 large U.S. companies, and includes the reinvestment of dividends. The Russell 1000 Index measures the performance of the large-cap segment of the U.S. equity universe. It is a subset of the Russell 3000 Index and includes approximately 1000 of the largest securities based on a combination of their market cap and current index membership, and includes the reinvestment of dividends. The Russell 2000 Index measures the performance of the small-cap segment of the U.S. equity universe. The Russell 2000 Index is a subset of the Russell 3000® Index representing approximately 10% of the total market capitalization of that index. It includes approximately 2000 of the smallest securities based on a combination of their market cap and current index membership, and includes the reinvestment of dividends. The Russell 1000 Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher price-to-book ratios and higher forecasted growth values, and includes the reinvestment of dividends. The Russell 1000 Value Index measures the performance of the large-cap value segment of the U.S. equity universe. It includes those Russell 1000 companies with lower price-to-book ratios and lower expected growth values, and includes the reinvestment of dividends. The Nasdaq Composite Index is the market capitalization-weighted index of approximately 3,300 common equities listed on the Nasdaq stock exchange. The types of securities in the index include American depositary receipts, common stocks, real estate investment trusts (REITs) and tracking stocks, as well as limited partnership interests. The index includes all Nasdaq-listed stocks that are not derivatives, preferred shares, funds, exchange-traded funds (ETFs) or debenture securities. The MSCI Euro Index captures large cap representation across the 10 Developed Markets countries in the EMU. With 112 constituents, the index covers approximately 70% of the free float-adjusted market capitalization of the EMU. The MSCI China Index captures large- and mid-cap representation across China H shares, B shares, Red chips, P chips and foreign listings (e.g. ADRs). With 711 constituents, the index covers about 85% of the China equity universe. Currently, the index also includes Large Cap A shares represented at 20% of their free float adjusted market capitalization. Sources of foreign exchange rates may be different be­tween a portfolio and the benchmarks. The indexes mentioned above are unmanaged and not available for direct investment. For comparison purposes, it should be noted that the indexes do not charge fees and have no expenses.

Source: London Stock Exchange Group plc and its group undertakings (collectively, the “LSE Group”). © LSE Group 2018. FTSE Russell is a trading name of certain of the LSE Group companies. Russell® is a trade mark of the relevant LSE Group companies and is/are used by any other LSE Group company under license. “TMX®” is a trade mark of TSX, Inc. and used by the LSE Group under license. All rights in the FTSE Russell indexes or data vest in the relevant LSE Group company which owns the index or the data. Neither LSE Group nor its licensors accept any liability for any errors or omissions in the indexes or data and no party may rely on any indexes or data contained in this communication. No further distribution of data from the LSE Group is permitted without the relevant LSE Group company›s express written consent. The LSE Group does not promote, sponsor or endorse the content of this communication.

Sector and industry weightings are determined using the Global Industry Classification Standard (“GICS”). GICS was developed by and is the exclusive property and service mark of MSCI Inc. (“MSCI”) and Standard & Poor’s (“S&P”), and is licensed for use by MCM. Neither MSCI, S&P, MCM, nor any third party involved in compiling GICS makes any express or implied warranties or representations with respect to such standard or classification (or the results from use thereof), and all such parties hereby expressly disclaim all warranties of originality, accuracy, completeness, merchantability and fitness for a particular purpose with respect to any such standard or classification. MSCI, S&P, and MCM, and any of their affiliates or third parties involved in compiling GICS shall not have any liability for any direct, indirect, special, punitive, consequential or any other damages (including lost profits) even if notified of the possibility of such damages.

Source: UMB Fund Services, Inc., FactSet and Marsico Capital Management, LLC (“MCM”). Data shown such as portfolio holdings, percentages, country, and sector weightings generally applied on the date shown above, and may have changed substantially since then. References to specific securities and sectors are not recommendations to buy or sell such securities or related investments.

 

 

 

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