The Investment Policy Group (“IPG”), comprised of all portfolio managers and research analysts, is the catalyst in our decision-making process. Portfolio policy and stock selection are reviewed at IPG meetings held at least twice weekly. Specific decisions regarding purchases and sales, as well as the percent of the portfolio any security is to represent, are based on consensus resulting from these meetings and are implemented across all large cap growth accounts unless there are specific client restrictions. In fully discretionary accounts with no client restrictions, the portfolio managers have no discretion to enact trades that are not approved by the IPG. As the markets do not operate in a vacuum, the IPG also meets twice a month to discuss macroeconomic issues. In these meetings, the IPG makes short-term economic forecasts and systematically reviews long-term economic, social, political and demographic trends having important influences on the financial markets and the companies that we follow. Sector and industry group allocation may be confirmed by this top-down thinking.

Large Cap Growth

Montag & Caldwell’s growth equity philosophy emphasizes fundamental valuation techniques which focus on a company’s future earnings and dividend growth rates. The process is primarily bottom up and utilizes a present valuation model in which the current price of the stock is related to the risk adjusted present value of the company’s estimated future earnings stream. The Firm seeks to buy growth stocks selling at a discount to fair value and at a time when superior earnings per share growth is visible for the intermediate term.

Philosophy and Process

At Montag & Caldwell, we believe that good investment returns are derived from the competent, disciplined, fundamental analysis of individual securities, performed by experienced professionals operating as a team. We are long-term investors focusing on high quality growth opportunities. Our process is primarily bottom-up in which we inter-relate valuation with earnings momentum. We offer a concentrated portfolio of 30-40 issues actively managed by a team comprised of both portfolio managers and analysts. The team is the catalyst in our decision-making. While we recognize the need to diversify a portfolio’s securities and sectors in order to reduce its risk, we believe that, in order to add value, it is also important to have some sector concentration in the portfolio. We are willing to totally exclude a sector from our portfolios if we do not see sufficiently accelerating earnings and/or appropriate valuations. Our growth equity philosophy utilizes a valuation technique which focus’ on a company’s future earnings and dividend growth rates. The process utilizes a present valuation model in which the current price of the stock is related to the risk adjusted present value of the company’s estimated future earnings stream. The identification of appropriate stocks for consideration for our large cap growth product begins with screening a universe of publicly traded U.S. securities for market capitalization of at least $3 billion (although we generally favor at least $5 billion market capitalization for investment consideration and typically purchase those with an $8-10 billion or greater market capitalization), an expected 10% earnings growth rate, and a proprietary quality evaluation. The  judgment based on qualitative factors and strong financial characteristics further narrow the universe to a select list. A holding will be reviewed for sale when it reaches our target price, which is normally 120% of the estimated fair value. A significant earnings disappointment will trigger an immediate review of the holding and a decision will be made to buy additional shares or reduce or eliminate the position.

September 30, 2024

Portfolio sector weights are of the Montag & Caldwell Large Cap Growth Representative Account.  Please see the disclosures presentation at the bottom of this page for important information that is pertinent to this chart.  Source: FactSet