Insights from SWS Partners

The following is an excerpt from our recently published SWS Growth Equity 2Q2021 strategy update, which is available in its entirety via pdf or audio stream. In the full piece, we provide our take on sifting through an increasingly volatile equity market backdrop, while assessing the strategic merits of our internally managed strategy for public growth-style equity.

In this latest installment of our quarterly accountability check-in, we assess an important milestone that gets to the core justification for launching SWS Growth Equity. Having honed an investment process inside a $100 billion dollar pension, we identified the opportunity to combine stock-picking acumen with risk-minded portfolio construction, then unveiling this to a much wider audience. This past May marked three years since we planted our flag with investment capital, including our own alongside external investors. We dive into the output of our efforts below, but our focus will always be on a universal goal of every public equity investor. Despite various ways it’s articulated, consistent risk-adjusted returns are at the core of every investor’s pursuit.

As we continue to emerge from the pandemic we are again provided with an opportunity to revisit existing ideas in a new and fresh way.  The most recent stress test of the economy, markets, and ourselves delivered by the pandemic of the past 15 months shouldn’t be wasted, particularly when it comes to equity investing.

With the “recovery shape” guessing game firmly in the rearview (happy to say goodbye to whether “K-shaped” should join ranks of “V-” and “L-shaped” in the economist vernacular), the YTD period is evidence of the difficulty in pricing future outcomes at this particular market juncture. Companies lifting the hood to their recent quarter’s results are doing so at a time when the year-ago snapshot captures one of the most precipitous drops in public markets history. Trying to level-set our true run-rate, while simultaneously deciphering what’s next for equity investors, seems to be an effort stuck in “work-in-progress” mode. As we head into the holiday weekend, we saw the opportunity to offer some food for thought to accompany that which is earmarked for the grill or cooler, all in the effort to help illuminate our path forward as equity investors.

The following is an excerpt from our recently published SWS Growth Equity 1Q2021 strategy update, which is available in its entirety via pdf or audio stream. In the full piece, we provide our take on sifting through an increasingly volatile equity market backdrop, while assessing the strategic merits of our internally managed strategy for public growth-style equity.

After enduring a year of drastic outcome disparities in public equity, we're reminded of an often-misconstrued aspect to large cap investing. The asset class tends to garner perceptions that higher "efficiency" translates into an inability to generate sustainable and attractive returns, either relative or absolute. The cited culprits range from a disproportionately higher amount of sell-/buy-side analyst eyeballs, deeper pools of liquidity, tighter bid/ask spreads, or name-brand awareness by investors among the blue chips. The embedded implication behind these factors is that large-cap cash flows are somehow easier to predict than that of more obscure or smaller cap issuers.

The following is an excerpt from our recently published SWS Growth Equity 4Q strategy update, which is available in its entirety here. In the full piece, we provide our take on thinking through various sources of macro uncertainty as investors, in addition to assessing the strategic merits of our internally managed strategy for public growth-style equity.

Coming off a recession-triggering year in the throws of a global health crisis creates a challenging backdrop for any market forecaster. In effort to chart our forward path, we find it helpful to borrow from our fundamental investment process, seeking simplicity among chaos. Here, we isolate our investment premise: exploiting the market’s inefficiency of pricing long-term competitive disruption, specifically that which is enabled by disruptive innovation. As we study the evidence that’s filtered through the macroeconomic noise, it’s clear that the global pandemic response accelerated many mis-pricings that we were readily poised to exploit in 2020. As we study the opportunity landscape going forward, we also see ample runway for attractive excess returns over the coming years.