Market Recap
The first quarter of 2024 presented a challenging investment environment for small-cap value stocks, as rising interest rates, geopolitical uncertainty, and concerns about slowing economic growth weighed on sentiment. The Russell 2000 Value Index declined by 6.5% during the quarter, underperforming the Russell 2000 Growth Index by a significant margin.
Portfolio Performance
Despite the challenging market environment, the ClearBridge Small Cap Value Strategy outperformed its benchmark, the Russell 2000 Value Index, in the first quarter of 2024. The Strategy returned -5.3% compared to the benchmark’s -6.5% return. This outperformance was primarily driven by the team’s active stock selection in the financial, industrial, and consumer discretionary sectors.
Stock Selection
In Q1 2024, the portfolio managers continued to focus on identifying undervalued companies with strong fundamentals and attractive valuations. They added several new positions to the portfolio, including:
* **AXL Technologies (AXL):** A leading designer and manufacturer of network communications solutions.
* **Euronet Worldwide (EEFT):** A global provider of payment and transaction processing services.
* **Universal Forest Products (UFPI):** A leading manufacturer and distributor of wood products.
The team also increased its exposure to existing portfolio companies that they believe are well-positioned to weather the current market volatility and deliver long-term growth. These companies include:
* **Dollar General (DG):** A discount retailer with a strong track record of growth.
* **Coherent (COHR):** A leading manufacturer of lasers and optical components.
* **WEC Energy Group (WEC):** A diversified energy company with a focus on renewable energy.
Sector Positioning
As of March 31, 2024, the portfolio had a significant overweight position in the financial sector, which benefited from rising interest rates. The portfolio also had overweight positions in the industrial and consumer discretionary sectors, where the team believes there are attractive opportunities for growth.
Conclusion
The ClearBridge Small Cap Value Strategy outperformed its benchmark in the first quarter of 2024, despite the challenging market environment. The team’s focus on identifying undervalued companies with strong fundamentals continues to drive performance. The team believes that the strategy is well-positioned to deliver long-term growth for investors, even in uncertain market conditions.
Kind regards
S. Sing
