In 2019, it had a 41.3% return, and outperformed the Russell 1000 Growth Index by 5.37%. That performance put it in the top decile of performance relative to SMA peers in the Morningstar large cap growth universe.
Stuzin, who has run the portfolio for 24 years, says they don't "meddle" much with the overall makeup of the fund. "We tend to be owners of what we hope are great business models, and we let those businesses — run by great management teams — essentially navigate their opportunity set. We don't trade in and out of companies all the time," Stuzin explained.
"Frankly, there aren't innumerable best-in-breed businesses by definition, and that's really the hallmark of how we have invested now for over 20 years."
The average time the portfolio includes a company is about five years, and sometimes longer. It has owned SalesForce for 12 years. Another stock it has owned long term is Dexcom, which makes medical devices for diabetics; that stock has gone from $45 in 2016 to $370 today.
The main tenet of the strategy is finding companies that can grow their earnings 14% or better through a market cycle. Brown Advisory is able to do this largely due to its partnership structure; its team members are looking for long-term returns, and don't think in quarterly time periods.
"We not only invest for the benefit of our clients, but our own money is in the [strategies]," said Stuzin. "All of my liquidity is in this fund, … so that's why I wake up in the morning and why I spend time overseeing the fund. It's in my interest [too]."
Reflecting on the past two years of outstanding performance, he explained: "A company is more than just what it does. It's also the people who run it."
According to Stuzin, "Good management teams aren't only good in the best of times, they also are good managers when things are tough and they have to make tough decisions. That's also a part of our process; when we analyze companies, we also analyze the track record of the management team."
This doesn't mean the portfolio team ignores short-term factors, like how the pandemic is affecting business models. "The pandemic is a perfect example of how we not only monitor these companies short term, but try to understand how consumer behaviors and corporate spending will change three-, five- or 10-years from now, and we'll look back and say, that pandemic changed the way we lived or did business," he explained.
"Around the margins" members of the portfolio team have made changes by eliminating online travel agencies, for example. "Why? Because travel is uncertain for the foreseeable future," Stuzin said.
They also added some firms, such as Lululemon — an athletic apparel company that does much of its business through e-commerce and controls its own distribution. Looking ahead, "It [will be] hard to imagine that compared to [2019], you won't have more people working from home — or at least have a more flexible work [situation]," he added. — Ginger Szala
