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Institutional Investor Advisor Individual Investor
Total AUM Avg. PM Years Experience Years Since Inception
$1.2B 21 9
As of December 31 2018

Strategy Average Annual Total Returns

(%, Gross of Fees)2
YTD 1 Year 3 Years 5 Years 7 Years Since Inception
ClearBridge Small Cap Composite -8.15 -8.15 10.18 6.77 12.86 15.78
Russell 2000 Index -11.01 -11.01 7.36 4.41 10.44 13.03
As of December 31 2018

Overview

The Strategy invests primarily in smaller-sized U.S. companies selling at a significant discount to their intrinsic value. Measures that are important in considering an investment candidate include the company's ability to generate free cash flow over the long term, earn an appropriate return on capital invested and allocate capital efficiently.

Strategy Overview Small cap value and growth stocks
Benchmark Russell 2000 Index
Total Strategy AUM $1.2B
Holdings Range 70-901
Objective Provide competitive returns relative to the Russell 2000 Index3

Investment Philosophy

Stock prices and intrinsic values can diverge for an extended period. We focus on our investment process to tilt odds of success in our favor.

Meet Our Managers

Albert Grosman

Portfolio Manager
25 Years experience
11 Years at ClearBridge

Brian Lund, CFA

Portfolio Manager
18 Years experience
14 Years at ClearBridge

Strategy Facts

Repeatable, proprietary investment process designed to form explicit variant perceptions relative to expectations embedded in the stock price.

Robust, frequent communication among investment team encourages diverse perspectives and improves the questions we ask and assumptions we make.

Diversification across industries and economic drivers results in a resilient portfolio that can outperform in a variety of market conditions and maximize risk adjusted returns.

Literature & Perspectives

  • Small Cap Strategy
    4Q18 Commentary: Small cap U.S. equities look more attractive than they have in several years, especially relative to private capital and large cap U.S. stocks.
  • Small Cap Strategy
    3Q18 Commentary: A quarter of strong outperformance shows the value of a longer-term perspective.
  • Small Cap Strategy
    2Q18 Commentary: Small caps performed well, though they were led by stocks with the highest expectations, lowest quality and strongest momentum.
  • Small Cap Strategy
    1Q18 Commentary: The recent volatility provides a welcome respite from this momentum market.
  • Small Cap Strategy
    4Q17 Commentary: There are still opportunities where probability-weighted expected value exceeds current stock price, with a margin of safety.

Investment Process

  • Valuation: Find gaps between expectations and intrinsic value 
  • Variant Perception: Identify specific reasons why our view differs from embedded expectations
  • Probabilistic Framework: Consider a range of possible outcomes to tilt odds of success in our favor
  • Long-Term Analytical Period: Think about long-term value creation like an owner
  • Follow investment principles systematically in a repeatable framework
  • Be aware of risks at security and portfolio level
  • Apply process broadly to try to be resilient in all types of markets

Performance

The ClearBridge Small Cap Composite has outperformed its benchmark (gross of fees) for the 1-year, 3-year, 5-year, 7-year and Since Inception periods ending December 31, 2018.

Average Annual Total Returns (%, Gross of Fees)2

YTD 1 Year 3 Years 5 Years 7 Years Since Inception
ClearBridge Small Cap Composite -8.15 -8.15 10.18 6.77 12.86 15.78
Russell 2000 Index -11.01 -11.01 7.36 4.41 10.44 13.03

Characteristics

The companies in the portfolio maintain a higher average return on equity (ROE) than those in the benchmark.

Sector Weights1,2

Representative Portfolio Russell 2000 Index
Financials 20.88 18.24
Information Technology 15.85 14.71
Industrials 13.94 14.83
Health Care 12.01 15.56
Consumer Discretionary 11.16 12.17
Real Estate 4.97 7.24
Consumer Staples 4.61 2.88
Communication Services 3.88 3.32
Utilities 3.85 3.83
Energy 3.00 3.52
Materials 2.97 3.71
Cash 2.88 0.00
Portfolio Characteristics1,2
Characteristics Representative Portfolio Russell 2000 Index
P/E Ratio (trailing 12 mos.) 10.7 14.3
P/E Ratio (forward 12 mos.) 11.6 14.3
Price/Book 2.4 2.7
EPS Growth Next 3-5 Years (%) 14.2 15.0
Weighted Median Market Cap ($ bn) 2.1 1.8
Weighted Average Market Cap ($ bn) 2.2 2.0
ROE 14.0 7.8
Dividend Yield 1.4 1.6
Turnover (trailing 12 mos.) 48.9 --
Risk Statistics1
7 Year Risk Statistics Composite Russell 2000 Index
Annualized Returns (7 Years) 12.86 10.44
Standard Deviation (%) 13.89 14.68
Sharpe Ratio 0.91 0.72
Tracking Error (%) 4.03 --
R2 0.93 --
Alpha (%) 3.06 --
Beta 0.91 --
Top 10 Holdings1
Characteristics % of Total Representative Portfolio
Amarin Corp PLC 3.54
Gray Television Inc 2.64
Aaron's Inc 2.50
Cadence BanCorp 2.42
Black Hills Corp 2.40
First Interstate BancSystem Inc 2.21
Murphy USA Inc 1.98
Sprouts Farmers Market Inc 1.93
HealthEquity Inc 1.93
Encompass Health Corp 1.79
Total 23.35
Total Number of Holdings 75
  • 1

    Source: FactSet. Representative portfolio characteristics, holdings, sector weightings and market cap are based on a representative portfolio and are subject to change at any time. Holdings, sector weightings, market cap and portfolio characteristics of individual client portfolios may differ, sometimes significantly, from those shown. This information does not constitute, and should not be construed as, investment advice or recommendations with respect to the securities and sectors listed.

  • 2

    Past performance is no guarantee of future results. See GIPS endnotes. Performance is preliminary and subject to change.

  • 3

    There is no guarantee that the Strategy's objective will be met.

  • P/E ratios are weighted harmonic average. Price/Book is weighted average.

  • Performance source: Internal. Benchmark source: Russell Investments. Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and/or Russell ratings or underlying data and no party may rely on any Russell Indexes and/or Russell ratings and/or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication.

  • Annualized Returns  1 Yr (9/30/18) 3 Yrs (9/30/18) 5 Yrs (9/30/18) Since Inception (9/30/18)
    Net-of-fees  16.5% 18.4% 13.0% 18.0%
    Gross-of-fees  17.5% 19.4% 13.9% 19.1%
    Russell 2000 15.2% 17.1% 11.1% 16.2%
  • ClearBridge Investments, LLC claims compliance with the Global Investment Performance Standards (GIPS®). ClearBridge Investments, LLC ("ClearBridge") is a wholly owned subsidiary of Legg Mason, Inc. ("Legg Mason"). The investment advisory business now known as ClearBridge was registered in September 2005 to facilitate Legg Mason's acquisition of substantially all the equity asset management businesses known as Citigroup Asset Management. These former businesses serve as the foundation of ClearBridge and its claim of GIPS compliance for institutional accounts through predecessor firms, effective as of January 1997. In June 2008, ClearBridge combined this business with its retail business to form a single GIPS firm.  As of April 1, 2013 and January 1, 2016, ClearBridge's affiliates, Global Currents Investment Management, LLC, and ClearBridge, LLC, respectively, have become part of the ClearBridge GIPS firm. The ClearBridge Small Cap composite invests in equity securities of U.S. companies that are within or below the market capitalization range of the Russell 2000 Index and that trade at significant discounts to the Investment Manager's assessment of intrinsic value. The strategy is designed for long-term investors who can tolerate the greater risks associated with small capitalization stocks. Under normal circumstances, the strategy will hold a portfolio of securities issued by small capitalization companies. These may include, but are not limited to, common stock, preferred stock, convertible securities, non-U.S. securities, ADR's, ETF's, and money market instruments. Clients should be aware of the possibility of high portfolio turnover, as the length of time a security is held is not generally a consideration with investment decisions. Results calculated in U.S. dollars. The Russell 2000® Index measures the performance of the small-cap segment of the U.S. equity universe. To receive a complete list and description of ClearBridge composites and/or a presentation that adheres to the GIPS standards, please contact ClearBridge Institutional Marketing.