Large Cap Growth

Distinguishing Characteristics

Thought Process

We view our mission in growth investing through a different lens, creating a differentiated and common-sense focus on how to add value for clients.

Experience

Our team has extensive history and experience throughout numerous growth stock cycles dating back to the early 1990s; we have ample battle scars.

Return Stream

We have multiple different mechanisms to define and manage risk differently which can lead to less correlation with the amplitudes of growth stock cycles.

The Way We Think

We believe the growth stock universe is a behaviorally inefficient, loser’s game, where alpha can be created by systematically “winning by not losing.” We apply our beliefs by investing in businesses possessing a superior franchise, making them more immune to disruption, and allowing them to generate sustainable growth, high profitability, and abundant free cash flow. We try to bend the odds in our favor.

We Believe In:

Avoiding Failure

Growth companies have a high failure rate as the forces of capitalism unite to compete away longer-term excess profits. Only a select few dominant economic franchises can transcend this enduring reality.

Key Factor Drivers

Profitability, industry structure, and free cash flow production are more important than the rate of revenue growth as alpha-generating drivers over most medium and longer-term time investment horizons.

Disruption

Disruption is a permanent risk to incumbency, however, overconfidence biases exist in growth stocks as the ability to predict the indisputable winner in a new industry is low at an early stage in a company’s life.

Valuation Risk

Growth company stock prices are often structurally overvalued for the cash flows they eventually generate, and their premiums over other stocks are often distorted by investor behavior, amplifying risk.

Process and Portfolio Construction

We create a highly concentrated portfolio of 20-30 dominant business franchises which are more immune to disruption and; hence have much higher cash profitability than the average growth company.

Balancing Company and Factor Risk- A Multipronged Approach

Company Risk
- We define company risk not by statistical stock price variance constructs but by the probability of growth stock failure and the price paid for being wrong.
- We focus on the risk inherent in our defined risk buckets- some types of growth companies are ” just plain riskier” than most investors believe.

We utilize numerous stock factor overlays to evaluate sources of stock price risk.
- Quality of earnings
- Excess capital management
- Valuation
- Investor/ market dynamics, behavioral biases

Utilize our proprietary economic factor model to evaluate exposures to macroeconomic variables that can/might change leading to “unintended bets”.
- Inflation
- Excessive valuation expansion
- Economic growth expansion

Investment Strategy

We optimize the best attributes of a collaborative culture, fundamental and quantitative analysis, while maintaining a differentiated definition and view of risk. Let us show you how we have managed clients’ money for over 25 years.

Strategy: CastleArk U.S. Large Cap Growth

Index: Russell 1000 Growth*

Available Vehicles: Separately Managed Account, Collective Trust

Inception Date: February 28, 1999

We optimize the intersection of fundamental research collaboration and quantitative modeling which helps us objectively distinguish between a great company and great stock.

A differentiated definition of both company and economic risk that helps us understand the true intended and unintended exposures within our franchise growth stock universe.

We maintain the financial characteristics of ultra-high quality companies in reasonable growth rates, profitability structure, ROIC, financial leverage, and cash flow production throughout the portfolio.

View Fact Sheet

Composite Performance as of September 30, 2024*

_{Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication.}

_{The Russell 1000 Growth Index represents a segment of the Russell 1000 Index that display signs of above average growth. The Russell 1000 Index is an index of approximately 1,000 of the largest companies in the U.S. equity markets.}

_{Composite Performance reflects reinvestment of all income and capital gains and is shown in US dollars and after the deduction of transaction costs. Composite Performance is shown gross and net of actual management fees charged. Actual investment advisory fees incurred by clients may vary. Additional information on the calculation methodologies used herein is available upon request. Indexes are unmanaged, do not incur management fees and cannot be invested in directly. The Composite and index returns are net of any foreign withholding taxes on dividends, interest, and capital gains.}

_{Past performance is not indicative of future results. Performance during certain periods reflect strong stock market performance that is not typical and may not be repeated.}