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Mike Parker, CFA and Kurt Grove, CFA

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SWS Quarterly Research - April 2021 Update

Posted by Mike Parker, CFA and Kurt Grove, CFA on 4/20/21 6:50 AM

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.

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Topics: Investing in the Future, Current Events, Asset Management, Growth Equity Commentary

SWS Quarterly Research

Posted by Mike Parker, CFA and Kurt Grove, CFA on 1/21/21 10:40 AM

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.

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Topics: Investing in the Future, Current Events, Asset Management, Growth Equity Commentary

Unpacking Political Outcomes

Posted by Mike Parker, CFA and Kurt Grove, CFA on 11/2/20 2:15 PM

The following is our view on how to navigate this week’s heavy political slate, which is an excerpt of our Growth Equity quarterly update.

Political risks are particularly challenging for investors, especially in economic areas where cash flows can be impacted by shifting political winds. Thanks to the fungibility of capital, we see opportunities for the main cylinders of our economic engine to continue to fire. The exercise just requires increased fundamental rigor.

The Market’s Dynamic Adjustments to Probability

The only thing certain about political uncertainty: it comes in many forms and can be tough to predict. The House subcommittee’s efforts are one aspect, while November moves us closer to solidifying compositions of both executive and legislative branches. Given that this particular exercise recurs on four- (presidential) and two-year (midterm) cycles, the market is no stranger to digesting, and seeing through, this newsflow. The market’s embedded probability-weighing mechanism will not wake up on November 4th and flip from 0% to 100% should the underdog win; probabilities shift daily in one way or the other with prices adjusting in anticipation of the changing outcomes.

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Topics: Investing in the Future, Current Events, Asset Management, Growth Equity Commentary

Satisfying Absolute and Relative Outcomes

Posted by Mike Parker, CFA and Kurt Grove, CFA on 10/23/20 3:15 PM

The following is an excerpt from our recently published SWS Growth Equity 3Q strategy update, which is available in its entirety here. In the full piece, we provide our take on how to think through various sources of political uncertainty as investors, in addition to assessing the strategic merits of our internally managed strategy for public growth-style equity.

We view our quarterly updates as accountability milestones. The main goal is for the embedded analysis to act as the ultimate arbiter on whether our premise remains valid while assessing our efforts to deliver results. Despite what feels like a year’s worth of market-impacting news squeezed into a single quarter—we take a stab at deciphering some of this later in our Market Perspective section—3Q2020 was accretive in both relative and absolute terms, and we remain optimistic on continuing our quest for sustainable alpha delivery. We also see strong odds that the output of these efforts could satisfy two important investor bases, the ever-discerning relative performance seekers and those more focused on absolute outcomes. The details behind this reveal that long-term capital is well served by focusing on the sources of disruptive innovation.

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Topics: Investing in the Future, Current Events, Asset Management, Growth Equity Commentary

Recent Volatility in Context

Posted by Mike Parker, CFA and Kurt Grove, CFA on 9/9/20 4:11 PM

Volatility in the equity markets is ever-present, even if it may be hiding below the surface for some time. Investors do not need to be reminded of March 2020, where the Market Volatility Index (“VIX”) spiked to 82, coinciding with 31%, 38%, and 34% respective declines in the Russell 1000 Growth Index, Russell 1000 Value Index, and S&P 500 Index.

Chart 1: CBOE Volatility Index (“VIX”) Source: FactSet

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Topics: Investing in the Future, Asset Management, Financial Planning

Strategy Fact Sheets
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SWS Growth Equity (Apr 2021): Access Here

 
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SWS Dividend Equity (Apr 2021): Access Here

 
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SWS Balanced Income (Mar 2021): Access Here

Strategy Resources
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Growth Equity 1Q2021: Access Here

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Growth Equity 4Q2020: Access Here

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Growth Equity 3Q2020: Access Here

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Growth Equity 2Q2020: Access Here

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Growth Equity 1Q2020: Access Here

Other Research
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Unleashing Asset Allocation Benefits (Mar 2019): Access Here

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4Q2018 Market Update: Access Here

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Volatility in Context (Dec 2018): Access Here

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3Q2018 Market Update: Access Here

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2Q2018 Market Update: Access Here

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Growth Becoming "The Market" (Jul 2018): Access Here

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The Current Opportunity (Apr 2018): Access Here

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