4th Quarter 2017

Portfolio managers are supported by the entire Thornburg investment team.

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U.S. stocks ended 2017 much like they began it: on a nearly uninterrupted upward trajectory that saw few pullbacks of any meaningful magnitude or duration. For the entirety of 2017, the S&P 500 Index did not post a single negative monthly return, the only time in its 94-year history. This is remarkable in and of itself, and, coupled with the lowest volatility in 10 years, created a unique market environment with few dislocations. As long-time investors may recall, we find market corrections to be an ideal time to deploy capital in high-quality growth businesses as their valuation multiples often compress to a greater degree than the broader market on pullbacks. While we are not in the business of predicting market corrections, it seems unlikely that the market will have another year without a monthly loss. If that arises, we will be aggressive in deploying capital to high-quality growth businesses trading at attractive valuations.

For the fourth quarter of 2017, Thornburg All Cap Growth Strategy returned 4.87% (net of fees), versus the Russell 3000 Growth Index return of 7.61%.

While the strategy generated a positive absolute return for the quarter, there were several challenges. In addition to a market that was providing few opportunities to buy high-quality growth companies at a discount to intrinsic value, we had several names that were heavily punished for third-quarter earnings misses. Much like with market corrections, we find opportunities to invest during these large price corrections of individual holdings, as they tend to be oversold in the near term, while the long-term growth prospects remain compelling. This is precisely what we did in the quarter for the holdings in which long-term earnings growth prospects were not impaired.

At the sector level, the strategy’s best-performing areas were materials, financials, energy, and consumer staples. Our average allocation to these sectors for the period was just 18% of the portfolio in aggregate, and thus their outsized returns were less impactful to the portfolio overall. Information technology is our largest sector exposure, and we modestly lagged the market primarily due to weakness in two stocks. The biggest drag on performance for the quarter again came in industrials, where we were underweight and had poor performance driven by weakness in two individual holdings.

Top Contributors

  • FleetCor Technologies, Inc.
    FleetCor is the world’s largest provider of fleet payment cards. The company’s shares rallied after it reported a beat on third-quarter earnings and raised guidance, while buying back more shares than expected. We believe the investment continues to be compelling, as the initial outlook for 2018 appears favorable and its valuation is still below recent highs.
  • Walmart Inc.
    Walmart has continued to make progress on two fronts: its U.S. stores and online business. The investment in refurbishment and in higher pay for associates (i.e., improving the in-store experience) seems to be paying off, as Walmart’s U.S. stores continue to show positive traffic trends. Further, following the acquisition of Jet.com and an expansion of the products available at Walmart.com, Walmart has posted strong organic growth recently in its online business.
  • Cavium, Inc.
    Cavium is a provider of semiconductor processors that enable intelligent functionality for applications in networking, communications, storage, and security. During the quarter, Cavium agreed to be acquired by another semiconductor company, Marvell Technology Group, for a substantial premium to its current valuation.
  • SVB Financial Group
    SVB (formerly Silicon Valley Bank) specializes in providing banking services to startup, technology, and life science companies. Shares rallied after SVB reported a very good third quarter that demonstrated high growth and excellent credit-quality metrics.
  • Amazon.com, Inc.
    Amazon continued to show strong momentum in both its e-commerce and web services business. Quarterly results exceeded expectations as growth accelerated. Amazon continues to lead the retail shift to e-commerce, which is still in its early days at 10% market penetration. Amazon is a share gainer in e-commerce as it continues to press scale-driven advantages of selection, availability, and superior service levels.

Top Detractors

  • Wix.com Ltd.
    Wix is a global cloud-based platform that enables businesses and individuals to create and manage professionalquality websites. Shares were pressured in the fourth quarter following third-quarter earnings, as management guided for more research and development and marketing costs in 2018 as it takes advantage of new growth opportunities in the professional website- developer market. While these investments depress earnings in the near term, we believe they position the company to capture more market share over the long term.
  • General Electric Co.
    During the quarter, GE cut its dividend and future earnings expectations. Its Power business has been the largest source of disappointment, with heightened competition and softening end demand.
  • Criteo SA
    Criteo is a retargeting company that works with internet retailers to serve personalized online advertisements to consumers who have previously visited the company’s website. During the year, Apple announced that its new operating system would automatically purge third-party internet cookies that Criteo uses to track Safari internet browser users. During the fourth quarter, Criteo announced that its initial solution to address the Apple issue would be less effective than initially thought, pressuring shares.
  • Newell Brands, Inc.
    Newell Brands is a global marketer of consumer and commercial products with a portfolio of over 200 leading brands, including Sharpie, Rubbermaid, Graco, Coleman, Yankee Candle, and many others. The company reported a weak set of third-quarter results, and core sales growth fell short of expectations due to retailer destocking and inventory adjustments at some key accounts.
  • Nevro Corp.
    Nevro is a medical device company that provides products to treat chronic pain, specifically a spinal cord stimulation system for the treatment of back pain. Its product is an alternative to treating back pain with opioid drugs. The stock was weak during the quarter primarily as a result of weaker-than-expected guidance for the fourth quarter of 2017. We believe the long-term prospects of the business are still exciting.

We continue to consistently adhere to our process and philosophy that employs rigorous, bottom-up fundamental analysis as we strive to build a portfolio of great businesses with attractive growth prospects.

Thank you for investing in Thornburg All Cap Growth Strategy.

Contributors to Performance1
(Representative Account)
NameContrib %Avg Wgt %
FleetCor Technologies, Inc. 0.79 3.55
Walmart Inc. 0.65 2.64
Cavium, Inc. 0.63 2.46
SVB Financial Group 0.55 2.42
Amazon.com, Inc. 0.51 2.58
Detractors from Performance1
(Representative Account)
NameContrib %Avg Wgt %
Criteo SA -0.65 1.38
General Electric Co. -0.58 1.67
Nevro Corp. -0.58 2.25
Newell Brands, Inc. -0.57 0.96
Wix.com Ltd. -0.36 1.60

1. Past performance does not guarantee future results. To obtain the calculation methodology and a list showing the contribution of each holding in the representative account to the overall account's performance during the reporting period, please email a request to bdg@thornburg.com. The holdings identified do not represent all of the securities purchased, sold or recommended for advisory clients.

Important Information

Performance data for the All Cap Growth Strategy is from the All Cap Growth Composite, inception date of January 1, 2001. The composite includes non-wrap discretionary accounts invested in the All Cap Growth Strategy. Returns are calculated using a time-weighted and asset-weighted calculation including reinvestment of dividends and income. Returns are annualized for periods greater than one year. Individual account performance will vary. The performance data quoted represents past performance; it does not guarantee future results. Gross of fee returns are net of transaction costs. Net of fee returns are net of transaction costs and investment advisory fees. For periods prior to 2011, net returns for some accounts in the composite also reflect the deduction of administrative expenses. Thornburg Investment Management Inc.’s fee schedule is detailed in Part 2A of its ADV brochure. Performance results of the firm's clients will be reduced by the firm's management fees. For example, an account with a compounded annual total return of 10% would have increased by 159% over ten years. Assuming an annual management fee of .75%, this increase would be 142%.


 As of 12/31/17

1 Yr

3 Yr

5 Yr

10 Yr

Inception 1/1/2001

 All-Cap Growth Composite (Net)


 All-Cap Growth Composite (Gross)


 Russell 3000 Growth Index


Unless otherwise noted, the source of all data is Thornburg Investment Management, Inc., as of 12/31/17.

The views expressed are subject to change and do not necessarily reflect the views of Thornburg Investment Management, Inc. This information should not be relied upon as a recommendation or investment advice and is not intended to predict the performance of any investment or market.

Holdings may change daily and may vary among accounts.

The information provided in this report should not be considered a recommendation to purchase or sell any particular security. There is no assurance that any securities discussed herein will remain in an account's portfolio at the time you receive this report or that securities sold have not been repurchased. The securities discussed may not represent an account's entire portfolio and in the aggregate may represent only a small percentage of an account's portfolio holdings. It should not be assumed that any of the securities transactions or holdings discussed were or will prove to be profitable, or that the investment recommendations or decisions we make in the future will be profitable or will equal the investment performance of the securities discussed herein.

Portfolio holdings and characteristics shown herein are from a representative account managed within the investment composite. The representative account is selected based on account characteristics that Thornburg believes accurately represent the investment strategy as a whole. Should these characteristics change materially, Thornburg may select a different representative account. Holdings may change daily and may vary among accounts, which may contribute to different investment results. The representative account information is supplemental to the strategy’s composite and GIPS compliant presentation.

Portfolio construction will have significant differences from that of a benchmark index in terms of security holdings, industry weightings, asset allocations and number of positions held, all of which may contribute to performance, characteristics and volatility differences. Investors may not make direct investments into any index.

Please see our glossary for a definition of terms.