LMASX
ClearBridge SmallCap-C
Introduction to ClearBridge SmallCap-C
ClearBridge SmallCap-C (LMASX) is a mutual fund designed to achieve capital appreciation by primarily investing in equity securities. The fund is part of the Franklin Templeton Investments family and focuses on small-cap companies, although it also includes some mid-cap stocks in its portfolio. This fund is particularly appealing to investors seeking growth opportunities in smaller companies, which often have higher growth potential compared to their larger counterparts. With an emphasis on small-cap equities, LMASX aims to capitalize on the dynamic and often volatile nature of smaller market capitalization stocks, offering investors a chance to benefit from the potential upside in this segment of the market.
At A Glance
Executive Summary
LMASX offers small-cap equity exposure with a focus on capital appreciation. Despite a high expense ratio, it provides a unique mid-cap allocation.
Focus on small-cap growth potential Diverse sector allocation Strong recent performance
High expense ratio Negative risk metrics Limited large-cap exposure
Performance Analysis: A Mixed Bag
The performance of LMASX has been a mixed bag, with a notable 1-year return of 29.51%, which is impressive compared to its peers. However, when looking at longer-term metrics, the fund’s performance is less stellar, with a 3-year annualized return of -0.84% and a 5-year return of 5.74%. The fund’s inception return stands at 10.35%, indicating that while it has had periods of strong performance, it has also faced challenges. The fund’s performance is benchmarked against the S&P 500 Total Return Index, which had a 1-year return of 37.62%, highlighting that LMASX has underperformed its benchmark over the past year. This mixed performance suggests that while the fund can deliver strong short-term gains, it may not consistently outperform over longer periods.
Sector Allocation: A Diverse Portfolio
LMASX boasts a diverse sector allocation, with significant investments in Industrials (16.94%), Financials (15.19%), and Health Care (14.62%). This diversification across sectors helps mitigate risk and provides exposure to various growth opportunities within the small-cap space. The fund also has notable allocations in Technology (10.43%) and Cyclical sectors (11.79%), which can offer substantial growth potential. However, the fund’s exposure to Utilities (2.87%) and Communications (3.13%) is relatively low, which may limit its defensive capabilities in market downturns. Overall, the sector allocation of LMASX reflects a balanced approach to capturing growth across different industries, making it an attractive option for investors looking to diversify their small-cap investments.
Risk Metrics: Navigating Volatility
The risk metrics for LMASX indicate a challenging landscape for investors. With an alpha of -8.15% and a beta of 1.11, the fund has underperformed its benchmark while exhibiting higher volatility. The Sharpe Ratio of -0.43 and Treynor Ratio of -7.33 further highlight the fund’s struggle to deliver risk-adjusted returns. Additionally, the fund’s standard deviation of 5.46% and downside risk of 3.73% suggest that investors should be prepared for potential fluctuations in value. Despite these challenges, the fund’s correlation with its benchmark is 72.50%, indicating some level of alignment with broader market movements. Investors considering LMASX should weigh these risk factors against the potential for high returns in the small-cap space.
Competitive Comparison: Standing Out Among Peers
When compared to similar funds, LMASX presents a unique profile. While its 1-year return of 29.51% is competitive, it falls short of some peers like Delaware Ivy SmallCap Growth-C (WRGCX) with a 1-year return of 34.26% and Optimum Small/MidCapGrowth-Inst (OISGX) at 35.00%. However, LMASX’s focus on a diverse sector allocation and its inclusion of mid-cap stocks provide a distinct advantage for investors seeking a broader exposure within the small-cap category. The fund’s expense ratio of 1.85% is higher than some competitors, which may be a consideration for cost-conscious investors. Despite these factors, LMASX’s unique approach to small-cap investing makes it a compelling choice for those looking to diversify their portfolio with a mix of small and mid-cap equities.
Top Holdings: Key Contributors to Performance
The top holdings of LMASX play a crucial role in its performance. Meritage Homes Corp (MTH) and Murphy USA Inc (MUSA) are the largest positions, comprising 2.19% and 2.17% of the portfolio, respectively. These companies, along with others like Wintrust Financial Corp (WTFC) and Corcept Therapeutics Inc (CORT), contribute to the fund’s growth potential. The fund’s focus on small-cap stocks is evident in its top holdings, which are primarily companies with significant growth prospects. This strategic selection of holdings aims to capitalize on the potential upside of smaller companies, aligning with the fund’s objective of capital appreciation. Investors should consider these top holdings as key drivers of the fund’s performance and potential future returns.
Expense Ratio: A Costly Consideration
One of the critical considerations for investors in LMASX is its expense ratio of 1.85%, which is relatively high compared to other funds in the small-cap category. This higher cost can impact net returns, especially over the long term. While the fund offers a unique blend of small and mid-cap stocks, investors must weigh the benefits of this diversification against the cost of investing in the fund. The expense ratio is a crucial factor for cost-conscious investors, as it directly affects the overall return on investment. Despite the higher expense, LMASX’s potential for capital appreciation and its diverse sector allocation may justify the cost for investors seeking growth opportunities in the small-cap space.
Conclusion: Is LMASX Right for You?
In conclusion, ClearBridge SmallCap-C (LMASX) offers a unique investment opportunity for those interested in small-cap equities with a focus on capital appreciation. The fund’s diverse sector allocation and inclusion of mid-cap stocks provide a balanced approach to capturing growth across various industries. However, investors should be mindful of the fund’s high expense ratio and mixed performance history. LMASX is best suited for growth-oriented investors who are comfortable with the inherent volatility of small-cap stocks and are seeking to diversify their portfolio with a mix of small and mid-cap equities. For those willing to accept the risks, LMASX presents a compelling option for capitalizing on the growth potential of smaller companies.
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