Investment Solutions

All Cap Equity Strategy

The objective of the Strategy is to generate alpha over a full market cycle by investing in a diversified portfolio of equities across all market capitalizations. The majority of portfolio holdings are domestic securities, but foreign securities may be included.

Management Approach: Team
Benchmark: S&P 1500® Equal Weight
Assets Under Management: $264.97 million*
Strategy Inception: January 2003

Fact Sheet: 3Q21 All Cap Equity

*as of 9/30/21

Typical Portfolio Attributes
Market Cap Range$250 million and greater
Number of Holdings30 - 60
Position Sizes1 - 5%
Maximum Sector Weightings Relative to the BenchmarkNo formal restrictions
Cash Levels< 5%
Portfolio ManagerTeam managed

Data subject to change.

Annualized Performance (%)

for period ended 9/30/21
 1 Year3 Year5 Year7 Year10 YearSince
All Cap Equity Composite (Gross)50.3813.0313.9310.3113.9610.70
All Cap Equity Composite (Net)49.2712.1513.279.7913.5310.03
S&P 1500® EW56.0112.9214.3412.5515.8812.58

Calendar Performance (%)

for period ended 9/30/21
All Cap Equity Strategy Composite (Gross)18.7020.2819.67-9.1712.6215.15
All Cap Equity Strategy Composite (Net)18.0519.31 18.74-9.5712.3314.90
S&P 1500® EW22.1614.8924.50-9.5714.0123.18


The All Cap Equity Strategy underperformed its benchmark in the quarter because of security selection. When making investment decisions, we seek to own good businesses at good prices so our sector allocations are byproducts of the businesses we own. We comment on those companies that have the most significant impact on estimated security selection.

Among the companies positively impacting security selection: Inc. sells software as a service (SAAS) subscriptions to print postage and shipping labels on site to obtain low cost and convenience. agreed to be acquired by private equity firm Thoma Bravo LLC for $330 per share on July 9th a 67% premium over the previous day’s stock price. The deal closed October 6th. We liked its entrenched competitive position resulting from its first-movers advantage and breadth of services, a growing market benefitting from e-commerce and convenience, and its ability to leverage operating costs and saw larger growth opportunities, beyond the small business core, in both enterprise and international.

Fortinet, Inc. is global leader in cybersecurity solutions for a wide range of organizations, including enterprises, communications, governments, and small and medium businesses. Its solutions provide broad network visibility and features automated protection, detection, and response. Second quarter results for revenue and billings growth were at five-year highs. Growth was broad based and across FortiGate brand products and non-FortiGate brands, as well as across all geographies. We believe it will remain one of the leaders in the small and medium business market while taking share in large enterprises. We feel its full enterprise suite that includes a large complement of products in networking, infrastructure security, cloud security, and endpoint protection, provides a performance advantage over much of the competition.

Palo Alto Networks, Inc. is one of the top providers of enterprise network security used to secure all users, applications, data, networks, and devices with comprehensive visibility and context, continuously and across all locations. Fourth Quarter results came in much better than expectations with billings advancing 34% year-over-year and well above the guided range of 22% to 23% and revenue growth of 28% also above the top-end of the guided range. Growth was driven by strong demand across all geographies and product areas with subscription and support based revenues increasing 36% and accounting for 72% of the total. Cybersecurity has become a focus for enterprises as the incidence of breaches continue to increase and user and customer data is lost, especially as the enterprise network perimeter has disappeared. Those offering enterprise-wide security solutions are best positioned as the IT landscape moves towards less vendors and complexity is increasing with distributed infrastructure and end user flexibility.

Meredith Corporation uses media platforms including print, digital, video and broadcast television to provide consumers attractive content and deliver messages from its advertising partners. With the number one reach to women, its national media group brands include People, Parents, InStyle, Martha Stewart Living, and Better Homes and Gardens. Additionally, the local media group owns and operates several television stations in attractive markets nationwide. On September 23rd Dow Jones reported that Meredith is negotiating a sale for the remaining publishing business with IAC/InterActiveCorp. for a deal valued over $2.5 billion. This follows the announced sale of the television station and broadcasting segment to Gray Television, Inc. We like the durability of its audience and advertisers across various print and digital platforms. We expect Meredith to expand audience share and for its properties to attract premium advertising.

AMN Healthcare Services, Inc. is the leader and innovator in total talent solutions for the healthcare sector in the United States. Its solutions are used to optimize workforces, simplify staffing complexity, increase efficiency, and ultimately elevate the patient experience by providing staffing, recruitment, technology, and analytics. Guidance for third quarter revenue suggests year over year revenue growth in the range of 40-43% as the tight market for health care labor continues and clinician fatigue and desire for leaves of absences are compounding matters. We see the business benefitting from increased demand related to COVID 19 and the backlog of elective procedures. Management is focused on expanding strategic customer relationships using workforce solutions that generate higher margin recurring revenues that are less economically sensitive.

Among the companies negatively impacting security selection:

Westport Fuel Systems Inc. produces natural gas engines and fuel system components for on and off-highway commercial vehicles as well as passenger automobiles. Its technologies include High Pressure Direct Injection (HPDI) and spark ignition technology shared as part of a joint venture with Cummins Inc. Concerns over the semiconductor shortage impacting the transportation market as well as higher natural gas prices in Europe and China pressured the shares. We believe the company is well positioned to play a key role enabling the utilization of cheaper cleaner natural gas for the purpose of transportation.

American Eagle Outfitters, Inc. is a multi-channel retailer with two distinct brands: AE and Aerie. It specializes in apparel, active wear, intimates, and swimwear among other things and operates over 1,000 stores and licenses over 200 additional stores. Quarterly revenues of $1.2 billion were the highest in history and increased 19% compared to 2019’s second quarter but were below consensus estimates. Operating profit also set a record aided by significant margin expansion at AE and the 27th consecutive quarter of double-digit growth for Aerie. American Eagle leverages its flexible real estate lease terms to migrate the store portfolio to more profitable models. An example is closing mall locations in favor of standalone stores. Additionally, it has grown and integrated its digital presence with the bricks and mortar stores creating an attractive omnichannel experience. We see the Aerie Brand growing strongly and the slower growing AE Brand providing stability.

Western Digital Corporation is a leading developer, manufacturer, and provider of data storage devices including flash based solid-state drives (SSDs) and hard-disk drives (HDDs). Component shortages and industry wide supply chain issues weighed on the equity during the quarter. Longer term, we believe its shares do not reflect the value of the SSD business, a joint venture with Kioxia. Although there are challenges to be resolved, value could be unlocked either through a Kioxia initial public offering or Western Digital purchasing Kioxia outright.

Skyworks Solutions, Inc. engineers and produces highly innovative analog semiconductors integrated into a system to enable wireless connectivity for mobile phones and other broad markets such as connected home and connected car. Quarter results included revenues and diluted earnings per share growing over 50% and 70% respectively when compared to 2020. However, guidance was viewed either as conservative or reflective of the potential for supply chain disruptions. Also, on July 26th it closed the acquisition of the industrial and automotive semiconductor business from Silicon Labs and it sees opportunities to sell those products into its existing customer base. The mobile phone 5G upgrade cycle is in the early stages and leads to higher content per phone. The broad markets business is expected to benefit from expanded use cases enabled by 5Gs blink of an eye response time. Additionally, a hybrid manufacturing model leverages both internal and outsource manufacturing capacity.

Premium athletic shoe and apparel retailer Foot Locker, Inc. operates through multiple store banners also including Champs Sports, Footaction and Runners Point. Its operating segments are defined geographically and include North America, EMEA (Europe Middle East and Africa), and Asia Pacific. Quarterly results were strong, and the shares responded favorably, however results from its largest supplier, Nike, were impacted by supply chain issues and pressured the shares. Additionally, it agreed to acquire two new store banners during the quarter WSS which has a southwestern footprint in the United States and is focused on the Latino community, and Atmos a digitally led premium retailer from Japan. It’s omni-channel capabilities bridge the digital world into physical stores and are used to maximize the shopping experience based on evolving behaviors. These changes include pivoting away from malls to new standalone stores and continued development and integration of digital capabilities. We expect financial performance in the way of cash flow generation and capital deployment to create shareholder value while maintaining a strong balance sheet.

We traded in the following companies during the quarter, unless otherwise mentioned:

We added shares of CarGurus, Inc. which seeks to be the single best platform for consumers and dealers to buy and sell vehicles. Its marketplace has the most inventory and the largest audience of potential buyers. Search results are ranked by its proprietary Deal Rating – a combination of Instant Market Value and Dealer Rating. Revenues are mainly derived from a dealer subscription model starting with the core service used to list vehicles in the marketplace. A 51% ownership interest in digital wholesale marketplace, CarOffers, allows dealers to establish criteria that can be used to automatically buy or sell inventory to other dealers. Consumers can also list vehicles on the CarOffers platform and receive an Instant Max Cash Offer from thousands of dealers in the network. We believe dealer inventory shortages related to semiconductor chip shortages have pressured subscription services and created an attractive entry point, consumer preference to leverage the digital channel has increased, and the wholesale CarOffers platform is attractive for dealers and consumers and a strong source of competitive advantage.

We added to our position in CVS Health Corporation as we believe the market underappreciates the synergistic earnings growth potential of the three main businesses including the CVS pharmacies, health care benefits under Aetna, and pharmacy services under Caremark. Examples include Aetna members being close to and incented to use reformatted HealthHUBs, the Caremark pharmacy benefit management business gaining share within the Aetna book of business and clinical programs designed to address chronic diseases. This format is being rolled out in areas with large Aetna membership and leveraged with home care and digital health capabilities.

Performance Attribution (%)

for quarter ended 9/30/21
Consumer Discretionary0.100.000.09
Consumer Staples0.020.100.12
Information Technology0.021.061.08
Real Estate-0.180.00-0.18
Communication Services0.040.700.74

Top Ten Holdings

for quarter ended 9/30/21
 % of Portfolio
Fortinet, Inc.5.84
AMN Healthcare Services, Inc.3.90
Meredith Corporation3.72
Palo Alto Networks, Inc.3.69
VS Health Corporation3.10
AmerisourceBergen Corporation2.77
CarGurus, Inc.2.70
CF Industries Holdings, Inc.2.70
PayPal Holdings, Inc.2.68

Top Contributors (%)

for quarter ended 9/30/21
 Average WeightContribution Inc1.901.23
Fortinet, Inc.5.201.18
Palo Alto Networks, Inc.3.010.87
Meredith Corporation2.720.77
AMN Healthcare Services, Inc.3.360.62

Top Detractors (%)

for quarter ended 9/30/21
 Average Weight Contribution
Foot Locker, Inc.1.49-0.38
Skyworks Solutions, Inc.2.82-0.39
Western Digital Corporation2.62-0.54
Westport Fuel Systems Inc.1.96-0.75
American Eagle Outfitters, Inc.2.49-0.77

Composite Characteristics

for period ended 9/30/21
Price/Earnings Ratio25.3323.86
Price/Book Value Ratio27.012.30
Dividend Yield (%)0.921.59
Weighted Average Market Cap105.95572.81
3 Year Annualized Tracking Error (%)7.30N/A
3 Year Annualized Standard Deviation (%)22.2125.52
3 Year Alpha1.15N/A
3 Year Beta0.84N/A
3 Year Information Ratio0.02N/A
5 Year Annualized Tracking Error (%)6.35N/A
5 Year Annualized Standard Deviation (%)18.2520.75
5 Year Alpha0.93N/A
5 Year Beta0.84N/A
5 Year Information Ratio-0.07N/A

Sector Weights

for period ended 9/30/21
Consumer Discretionary6.9412.48
Consumer Staples1.645.90
Information Technology29.9324.75
Real Estate0.002.90
Communication Services8.8114.81

Sources for all data are Stewart Capital Advisors and Bloomberg.

Past performance is not indicative of future results. There is no guarantee a specific investment strategy will be successful.

Portfolio attributes, sector weightings, and holdings represent individual equity holdings excluding cash, pooled investments, and other non-equity holdings and may change without notice.

Performance attribution does not incorporate the effects of cash, unclassified securities or expenses. Positions smaller than 0.05% round to 0.0%. Totals may not match stated returns due to rounding, effects of cash, and timing of trades.

Top contributors/dectractors = average weight x total return during the time period.

The contributors/detractors listed do not represent all securities purchased or sold for our clients. To obtain a list showing the contribution of each holding that contributed to overall performance during the quarter and the calculation methodology, please call 855.783.9227.

The S&P 1500® Equal Weight is an unmanaged index of U.S. stocks made of all stocks in S&P 500®, S&P 400® and S&P 600®. About 90% of all the U.S. market stock capitalization are encompassed here and each stock is equally weighted.

The information contained herein does not constitute a solicitation or recommendation by Stewart Capital Advisors, LLC (SCA). The views expressed by the portfolio managers are as of the quarter-end specified. The information may contain opinions or forward-looking statements that are subject to change at any time without notice, and is not intended to predict the performance of any individual security, market sector, or portfolio. No assurance can be given that these opinions or statements will prove accurate or profitable. The securities discussed do not represent an account’s entire portfolio and in the aggregate may represent only a small percentage of an account’s portfolio holdings.

This information is solely for supplemental information purposes, intended for institutional investors, and may not be provided unless directly accompanied by the fully compliant Global Investments Standards (GIPS) disclosure.