Managers & Models

Large Cap Growth Strategies That May Offer Relative Downside Protection

As large cap and large cap growth continue to dominate the market and be responsible for the majority of index returns, some advisors consider this run nearing its end and so are looking for strategies that are more dynamic to shift away from the most overbought sectors, providing a way to potentially continue to participate in the large cap run but offer a bit more downside protection. Here are three of the large cap growth strategies available on the Freedom Advisors platform in which advisors are investing now.

Neuberger Berman Large Cap Disciplined Growth

The Neuberger Berman team is dedicated to maximizing performance while effectively managing risk. Their approach involves investing in companies that exhibit promising growth metrics, such as accelerated earnings per share, robust cash flow or a growing number of subscribers, driven by identifiable catalysts. These investments are made with a keen eye on reasonable pricing, ensuring that they align with the team's objective of backing expanding enterprises while providing a safety net in case the catalysts fail to materialize or have the expected impact on crucial growth indicators.

In addition to growth metrics, the team seeks specific characteristics in their investment targets. These include an adept and approachable management team, substantial market capitalization, ample liquidity, manageable leverage, and the potential to generate both free cash flow and operating income growth over time. These attributes, in their view, hold the promise of price appreciation through earnings growth and the enhancement of valuation driven by an improved investor perception. The team also places a strong emphasis on stocks with reasonable initial valuations, which they believe offer a protective shield for investors.

The successful execution of this strategy hinges on several key principles:

• Fundamental Research: The team goes beyond standard financial statement analysis, conducting in-depth research to uncover promising investment opportunities.
• Disciplined Investment Process: Portfolio construction, risk management and sell discipline are intricately linked to ensure a structured approach.
• Experienced Portfolio Managers: The team's portfolio managers have the experience to identify potential opportunities and the discipline to adhere to their investment process across all market environments.

Zacks Focused Growth Strategy

The Zacks Focused Growth Strategy represents an assertive, high-turnover investment approach with a historical track record of surpassing the Russell 1000 Growth Index's performance. Within its investment universe, primarily comprised of Russell 1000 Growth Index securities, the strategy relies on a proprietary quantitative model to uniformly rank these stocks on a scale from 1 to 99.

In terms of portfolio construction, the strategy employs a stock selection model that considers earnings accruals, the Zacks Indicator and the peer comparison score to compile an initial watchlist of potential investments. It ensures that the selected securities' sector and market capitalization align with the established risk controls. Additionally, liquidity is a critical factor, with a preference for securities that can be traded without incurring substantial transaction costs. Corporate actions like mergers are excluded from consideration. Daily risk reports are systematically generated to monitor concentration levels, sector and market capitalization exposures, and factor exposures. Portfolio Value at Risk (VaR) is subject to daily monitoring as well.

To effectively manage risk, the strategy leverages the Zacks Research System (ZRS), featuring proprietary databases housing historical pricing, returns and fundamental factor data for individual securities within its selection universe. ZRS plays a crucial role in the Infanger optimization process, which aims to control portfolio tracking errors while imposing constraints such as position limits, sector and market capitalization exposures, and factor exposures. ZRS also provides specialized software and data to continually assess the portfolio's factor exposures and return attribution.

EQIS Large Cap Growth

The EQIS Large Cap Growth investment strategy is characterized as a dynamic approach with a focus on large-cap equities that have demonstrated robust growth potential. It seeks to achieve this by strategically selecting stocks from a universe of large-cap equities and employing a proprietary quantitative model to assess their growth prospects.

This investment strategy places a particular emphasis on factors such as revenue growth, earnings growth, and other key performance metrics to identify promising investment opportunities within the large-cap space. The EQIS Large Cap Growth strategy also incorporates risk management techniques to help protect the portfolio against adverse market conditions and maintain a balanced risk-return profile.