SCSMX
ClearBridge SmallCap Growth-C
Introduction to ClearBridge SmallCap Growth-C
The ClearBridge SmallCap Growth-C (SCSMX) fund is designed to achieve long-term capital growth by investing primarily in small-cap equity securities. Managed by Franklin Templeton Investments, this fund targets companies with market capitalizations similar to those in the Russell 2000 Index, focusing on firms that are below the top 1000 stocks in the equity market. With an emphasis on small-cap growth, SCSMX aims to capitalize on the potential for significant appreciation in smaller, emerging companies. This fund is particularly suited for investors with a higher risk tolerance who are seeking aggressive growth opportunities in the small-cap sector.
At A Glance
Executive Summary
SCSMX offers exposure to small-cap growth stocks with a high expense ratio of 1.93%. It underperforms its benchmark but provides diversification in tech and healthcare.
Focus on small-cap growth potential Diverse sector allocation with tech and healthcare Managed by Franklin Templeton Investments
High expense ratio at 1.93% Underperformance compared to benchmark Negative risk metrics like Sharpe Ratio
Sector Allocation: A Focus on Technology and Healthcare
SCSMX’s portfolio is heavily weighted towards the technology and healthcare sectors, which together comprise over 50% of its holdings. Technology accounts for 28.89% of the fund, reflecting a strategic emphasis on innovation-driven companies that are poised for growth. Healthcare follows closely with a 21.55% allocation, indicating a focus on companies that are at the forefront of medical advancements and biotechnology. This sector allocation suggests that the fund is positioned to benefit from the rapid growth and transformative potential inherent in these industries. Investors interested in these sectors may find SCSMX’s allocation strategy appealing, as it aligns with trends in technological and healthcare innovation.
Performance Analysis: A Mixed Bag of Returns
The performance of SCSMX has been mixed, with a notable 27.39% return over the past year, yet a negative three-year return of -8.07%. This volatility is indicative of the inherent risks associated with small-cap growth investments. While the fund has shown strong short-term performance, its long-term returns, such as the 6.11% five-year and 7.93% ten-year returns, suggest a more tempered growth trajectory. Compared to its benchmark, the S&P 500 Total Return Index, which posted a 37.62% one-year return, SCSMX has underperformed, highlighting the challenges of maintaining consistent growth in the small-cap sector. Investors should weigh these performance metrics against their risk tolerance and investment goals.
Risk Metrics: Navigating Volatility
SCSMX exhibits several risk metrics that potential investors should consider. The fund’s beta of 1.25 indicates higher volatility compared to the market, while its negative alpha of -10.27% suggests underperformance relative to its benchmark. The Sharpe Ratio of -0.51 and Treynor Ratio of -8.24 further underscore the fund’s risk-adjusted return challenges. Additionally, the fund’s standard deviation of 5.86% reflects its price volatility, and the max drawdown of -11.5% highlights potential losses during market downturns. These metrics suggest that SCSMX may be more suitable for investors who are comfortable with higher risk in pursuit of potential high returns.
Expense Ratio: A Consideration for Cost-Conscious Investors
With an expense ratio of 1.93%, SCSMX is on the higher end of the cost spectrum for mutual funds. This fee structure may be a deterrent for cost-conscious investors, especially when compared to similar funds with lower expense ratios. For instance, Delaware Ivy SmallCap Growth-C (WRGCX) and MFS New Discovery-C (MNDCX) have expense ratios of 0.0188 and 0.0204, respectively. While the higher expense ratio may be justified by the fund’s active management and focus on small-cap growth opportunities, investors should carefully consider whether the potential returns justify the costs. Evaluating the fund’s performance net of fees is crucial in determining its overall value proposition.
Top Holdings: Concentration in High-Growth Companies
The top holdings of SCSMX reflect a concentration in high-growth companies, with Wingstop Inc (WING), Hamilton Lane Inc Class A (HLNE), and Varonis Systems Inc (VRNS) leading the portfolio. These companies represent a diverse range of industries, from fast-casual dining to financial services and cybersecurity, underscoring the fund’s strategy of investing in dynamic, high-potential firms. The presence of companies like Shift4 Payments Inc Class A (FOUR) and Wix.com Ltd (WIX) further highlights the fund’s focus on innovative and disruptive business models. This concentration in high-growth stocks aligns with the fund’s objective of capitalizing on the growth potential of small-cap companies.
Comparative Analysis: How SCSMX Stacks Up Against Peers
When compared to similar funds, SCSMX presents a mixed competitive profile. While its one-year return of 27.39% is commendable, it falls short of peers like Delaware Ivy SmallCap Growth-C (WRGCX) with a 34.26% return. Additionally, SCSMX’s expense ratio of 1.93% is higher than those of its peers, such as Alger SmallCap Growth Institutional-I (ALSRX) at 0.0138. Despite these challenges, SCSMX offers a unique sector allocation and a focus on small-cap growth that may appeal to certain investors. However, those seeking lower costs and higher returns might consider alternatives within the small-cap growth category.
Conclusion: Is SCSMX the Right Fit for Your Portfolio?
In conclusion, ClearBridge SmallCap Growth-C (SCSMX) offers a compelling option for investors seeking exposure to small-cap growth stocks, particularly in the technology and healthcare sectors. While the fund’s high expense ratio and mixed performance may be drawbacks, its strategic focus on high-growth industries and potential for significant capital appreciation could appeal to aggressive investors. Those with a higher risk tolerance and a long-term investment horizon may find SCSMX a suitable addition to their portfolio. However, investors should carefully consider their investment objectives and compare SCSMX against similar funds to ensure alignment with their financial goals.
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Futher Reading
https://finance.yahoo.com/quote/SCSMX/”>Yahoo: ClearBridge SmallCap Growth-C
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