3rd Quarter 2017

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For the third quarter of 2017, Thornburg All Cap Growth Strategy returned 3.34% (net of fees), versus the Russell 3000 Growth Index return of 5.93%.

U.S. stocks continued to grind higher during the period, as prices were supported by a synchronized global expansion, strong earnings, and the potential for supportive government policies. Markets have largely ignored escalating U.S. tension with North Korea, or the multiple catastrophic hurricanes that struck during the quarter. Strong fundamentals have supported rising stock prices this year, while earnings growth and positive revisions have helped to drive returns. We've seen limited expansion of valuation multiples for the broader market. Strong fundamentals will need to persist to support market valuations, which are the highest they've been since the early 2000s.

It was a mixed quarter for Thornburg All Cap Growth Strategy, highlighted by unusual sector leadership. The strategy's best-performing sectors were materials and financials. These sectors are low weights on a relative basis, and the returns of each were driven by the strong performance of one or two individual stocks. Information technology represents the strategy's largest sector exposure, and it modestly lagged the market, primarily due to the strength in semiconductor stocks and the portfolio's lack of exposure to that subsector. The biggest drag on performance this quarter came from industrials stocks, where we were underweight and saw poor performance driven by weakness in two of our three holdings in the sector.

Top contributors:

  • Nevro Corp.
    Nevro is a medical device company that provides products that treat chronic pain, specifically a spinal cord stimulation system for the treatment of back pain. This product is positioned as an alternative to opioid drug remedies. During the period, Nevro was able to deliver better-than-expected quarterly results driven by strong demand and improved sales-force efficiency.
  • PayPal Holdings
    Digital and mobile payments platform PayPal delivered a solid quarter by both beating our estimates and raising future revenue guidance, with the share price rising accordingly. The firm has established a very strong position for two secular trends: the shift from cash to digital payments and the move toward mobile payments. Recent European transactions in the payments space have highlighted the enviable leadership position that PayPal has developed in digital payments. The stock remains a top holding.
  • CF Industries Holdings
    CF Industries is a global manufacturer and distributor of nitrogen and phosphate fertilizer products. As the leading U.S. supplier of crop fertilizer, it benefits from secular growth in food demand. During the quarter we saw industry fundamentals improve as inventory levels fell, Chinese firms began to act more rationally, the European market started to stabilize, and competitors began raising prices.
  • Visa, Inc.
    Visa is the largest card network and payment processor in the world, and a long-time Thornburg All Cap Growth Strategy holding. Visa reported consistent results, which showed a modest acceleration in volume growth and led to a re-rating of the stock during the quarter.
  • Affiliated Managers Group
    Affiliated Managers Group is an investment management company with holdings in an array of alternative, hedge fund, private equity, and traditional asset managers. During the period the firm benefited from higher-thanexpected performance fees given favorable market returns, as well as strong flows into alternative assets and global equities.

Top detractors:

  • Zillow Group
    Zillow provides real estate information to buyers, sellers, renters, and real estate professionals through its website and mobile applications. The stock fell on what we judged to be a combination of profit-taking and worries over a possible settlement with the Consumer Financial Protection Bureau. We retain our conviction in the stock and used the weakness as an opportunity to add to our position.
  • Chipotle Mexican Grill
    Chipotle continued to experience food safety issues during the quarter, with the stock falling considerably following reports of a norovirus outbreak at one of its restaurants. Although the stock had shown signs of recovery, with restaurant-level margins improving and better cost management at the corporate level, same-store-sales comparisons continue to disappoint.
  • Acuity Brands
    Long-time holding Acuity Brands is the leader in lighting solutions for the commercial construction market in North America. The ongoing slowdown in small projects has persisted longer than expected, negatively affecting sentiment surrounding the stock. The long-term thesis remains compelling, and we expect small project weakness to be temporary.
  • Newell Brands
    Newell is a consumer products conglomerate offering a broad range of brands from Rubbermaid plastic products to Yankee Candles. Investors lost confidence this quarter in light of the Toys "R" Us bankruptcy (Newell owns Graco, a Toys "R" Us supplier). We believe Newell has a strong collection of brands, the opportunity to cut costs in their business, and the benefit of being channel agnostic (online/offline). We continue to hold the stock and find the valuation very attractive at these levels.
  • DexCom
    DexCom is a medical-device maker focused on continuous glucose monitoring systems for diabetes patients. The stock was roughly flat for the majority of the period but declined significantly following the U.S. Food and Drug Administration's announcement that it had approved a competitor device for broader use than analysts expected. This opened it up to compete with DexCom for Medicare reimbursement. Although this is a negative development for the stock, we felt the market reaction was too severe given the superiority of DexCom's product compared to the new entrant. We used the decline as an opportunity to add to the stock.

We continue to adhere to our process and philosophy that employ 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 %
Nevro Corp. 0.65 3.27
PayPal Holdings 0.50 2.55
CF Industries Holdings, Inc. 0.48 1.95
Visa, Inc. 0.47 4.08
Affiliated Managers Group, Inc. 0.37 2.59
Detractors from Performance1
(Representative Account)
NameContrib %Avg Wgt %
DexCom, Inc. -0.64 2.05
Newell Brands, Inc. -0.51 2.35
Acuity Brands, Inc. -0.39 2.24
Chipotle Mexican Grill, Inc. -0.39 1.20
Zillow Group, Inc. -0.36 1.91

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 9/30/17

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 9/30/17.

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.