Details Cookies
Cookie policy

This website uses cookies to offer you a better browsing experience by enabling, optimising and analysing site operations, as well as to provide personalised ad content and allow you to connect to social media. By choosing “Accept all” you consent to the use of cookies and the related processing of personal data. Select “Manage consent” to manage your consent preferences. You can change your preferences or retract your consent at any time via the cookie policy page. Please view our cookie policy here and our privacy policy here

Brown Advisory Ethical Selection Q4 2019 commentary

SaxoSelect Commentaries 5 minutes to read

Saxo Group

Instruments traded
Asset classesUS stocks
Investment styleFundamental analysis focused on environmental, social and governance (ESG)
Quarterly return+7.85% (net of fees)
Annualised volatility (since inception)12%

Market overview

During the fourth quarter, the Ethical Selection portfolio returned 7.8%. For the year, the portfolio meaningfully outperformed its benchmark. As we have seen throughout the year, the performance result relative to our benchmark was driven almost entirely by our stock selection. 

Portfolio performance

Inception (01.03.2019)

(Performance is net of all fees)


Best performing positions

Top 3 Contributors for Q4
  • United Rentals’ performance was strong in the quarter on the back of continued growth in its core rental business, strong free cash flow and returning investor optimism about the US’s industrial production.

  • UnitedHealth Group posted strong results in the most recent quarter and raised its outlook for the year. The stock responded well to diminished Medicare-for-All rhetoric. During the quarter, it also announced an agreement to buy Diplomat to strengthen its specialty pharmacy offering. 

  • Bank of America’s recent outperformance is a result of improvement in the domestic macroeconomic outlook and the company’s fundamental outlook, which included a strong quarterly earnings report and Warren Buffett’s request for regulatory permission to increase Berkshire Hathaway’s stake above 10%.
Top 3 Contributors for 2019: 
  • Zoetis is a leader in the animal health business, with a strong presence in pharmaceuticals and vaccines for companion pets and livestock. The company continued to perform well as its companion animal segment of best-in-class products continued to drive strong growth throughout the year. Recent growth has been aided by new drugs for atopic dermatitis in pets, which have seen strong demand, pricing and excitement surrounding the 2020 launch of Simparica, a treatment for ticks, fleas and heartworm.

  • Following a late third-quarter sell-off related to private market valuation uncertainty, China concerns and a broader shift into value names, KKR’s stock rebounded in the quarter following bullish commentary by management that suggested fundraising will remain strong and operating leverage is expected to drive earnings estimates higher. Management believes they can grow management fees meaningfully over the next three years as the company enters a new “supercycle” in fundraising. This growth, along with improving margin as new businesses continue to scale, should drive up earnings estimates.

  • American Tower is the most internationally exposed of the three public tower companies, with moderate small-cell exposure. Over the coming years, we believe American Tower is well-positioned to benefit from the transition to 5G, which should be accretive to its financial results.  

Worst-performing positions

Bottom 3 Contributors for Q4
  • Integra LifeSciences Holdings’ stock was relatively flat for the quarter, though it saw a strong reaction to its quarterly earnings results. While we were surprised by the magnitude of the reaction, we believe this was driven primarily by the year-end hedge fund sell-off. However, our conviction in the name remains, given the strength we saw earlier in the year. We expect further margin expansion and growth to accelerate in 2020. 

  • Bright Horizons Family Solutions posted strong results for the quarter, but the stock underperformed as the market rotated away from higher-quality, high-multiple businesses. 

  • Cisco was down for the quarter after its weak guidance for January 2020. We believe this reflects a soft enterprise spending environment due to global macroeconomic issues. 
Bottom 3 Contributors for 2019: 
  • WEX is a leading payment provider in specific verticals (fleet, corporate/travel and health/employee benefits). The stock posted a strong total return for the strategy but was a bottom contributor for the year in review. 

  • Charles Schwab’s stock posted modest positive returns for the year, as we had expected going into 2019. Our thesis remains intact for the name. Charles Schwab is a leader in the U.S. wealth management industry given its premier brand, attractive customer value proposition, meaningful economies of scale, asset-gathering capabilities, leading technology, digital franchise, high pretax margins and returns on allocated capital, and, finally, management’s considerable history of sensible stewardship. While much of Charles Schwab’s economics are tied to rates, they are also tied to equity markets, which tend to rise over time, and Schwab’s mix still possesses some countercyclical revenue streams, such as cash/sweep and flow-trading revenues. Finally, we believe that the announced merger with TD Ameritrade has the potential to transform the industry landscape and Schwab as a company. We believe that this deal helps show that Schwab is focusing on its competitive advantages and fighting the interest rate and cash-sorting issues that are present in a world with declining interest rates. 

  • Bio-Rad is a new position added to the strategy in the fourth quarter. See below for more detail. 

Changes to the portfolio

There was one new investment in the portfolio during the fourth quarter. Bio-Rad Laboratories Inc. (BIO) is a globally diversified manufacturer of life science and clinical diagnostic instruments, consumables, software and services. The company has leadership positions in DNA and cell analysis, bio-chromatography, blood typing, quality control and consumables for infectious disease testing. We believe the company advances the discovery process and improves health care. Its technology is used for early diagnosis of disease, notably in oncology, that has the potential to save lives and reduce health care costs. The company also provides products used in food and water safety testing and quality control to improve laboratory performance in immunology, hematology and chemistry.


The market responded positively to the decisive outcome in the British election, the announcement of a phase I trade deal between the U.S. and China, and the solid performance of the domestic economy. Central banks have kept monetary policy accommodative amid tepid inflation. 

Despite underlying positive indicators, Brown Advisory believe that many risks remain. Middle East tensions and the Hong Kong protests are still kindling. The health care debate in the US will rage louder during an election year. While domestic growth remains relatively steady, there are indications that industrial activity has weakened in many areas, including transportation and manufacturing. 

Throughout this market volatility, however, one thing has not changed. Brown Advisory have not altered our focus on bottom-up security analysis, ESG analysis of our investments and thoughtful portfolio construction. Brown Advisory believe this process continues to work, and we are confident that, over time, adherence to our approach should drive positive outcomes for our clients.

Brown Advisory expect stock picking to be the dominant driver of performance against the market, because their process looks to minimise bets on individual sectors, macro-economic or market factors, while maximising our idiosyncratic upside opportunities. That said, the ESG nature of this portfolio gives it a natural tilt away from hydrocarbon producing and consuming companies, typically in the energy and utilities sectors. Offsetting those underweights are overweights in sectors and companies with similar risk and macro factor exposures, such as industrials.

In conclusion, markets and the factors impacting recent volatility are being watched closely, but by focusing on process and staying disciplined with the portfolio, Brown Advisory believe the portfolio are confident to deliver outperformance over the long run whilst adhering to stringent ESG principles.


This material is provided for marketing and/or information purposes only. Fee charges mentioned herein are subject to change – you may find the latest updated pricing information on the description page for the respective portfolios. None of the information contained herein constitutes an offer (or solicitation of an offer) to buy or sell any currency, product or financial instrument, to make any investment, or to participate in any particular trading strategy. Saxo Capital Markets does not take into account your personal investment objectives, specific investment goals, specific needs or financial situation and makes no representation and assumes no liability to the accuracy or completeness of the information provided here. The information and commentaries are not intended to be and do not constitute financial advice, investment advice, trading advice or any other advice or recommendation of any sort offered or endorsed by Saxo Capital Markets. Any expression of opinion (which may be subject to change without notice) is personal to the author and the author makes no guarantee of any sort regarding accuracy or completeness of any information or analysis supplied. Although every endeavour has been made to ensure that our trading platforms are secure and reliable, please note that as with all facilities and systems, our trading platforms may be vulnerable to temporary disruption or failure. If you undertake transactions on an electronic trading system, you will be exposed to risks associated with systemic failure, i.e. failure of hardware and software.  

See the full Managed Portfolio Disclaimer for more information. Please also consider our Risk Warning and General Business Terms before trading with us.

Saxo Markets
Most of our staff in Singapore are working from home to help limit the spread of the coronavirus. We remain at your service on the details below. Thank you for your understanding.

Contact Saxo

Select region


Saxo Capital Markets Pte Ltd ('Saxo Markets') is a company authorised and regulated by the Monetary Authority of Singapore (MAS) [Co. Reg. No.: 200601141M ] and is a wholly owned subsidiary of Saxo Bank A/S, headquartered in Denmark. Please refer to our General Business Terms & Risk Warning to consider whether acquiring or continuing to hold financial products is suitable for you, prior to opening an account and investing in a financial product.

Trading in financial instruments carries various risks, and is not suitable for all investors. Please seek expert advice, and always ensure that you fully understand these risks before trading. Trading in leveraged products such as Margin FX products may result in your losses exceeding your initial deposits. Saxo Markets does not provide financial advice, any information available on this website is ‘general’ in nature and for informational purposes only. Saxo Markets does not take into account an individual’s needs, objectives or financial situation.

The Saxo trading platform has received numerous awards and recognition. For details of these awards and information on awards visit

The information or the products and services referred to on this website may be accessed worldwide, however is only intended for distribution to and use by recipients located in countries where such use does not constitute a violation of applicable legislation or regulations. Products and Services offered on this website is not intended for residents of the United States and Japan. Please click here to view our full disclaimer.

This advertisement has not been reviewed by the Monetary Authority of Singapore.