ClearBridge Investments, an investment management company, released its “ClearBridge Small Cap Growth Strategy” first quarter 2024 investor letter. A copy of the letter can be downloaded here. The Strategy underperformed the benchmark in the quarter. The small-cap growth universe revealed a stark dichotomy despite the positive performance of the benchmark Russell 2000 Growth Index, which returned 7.58% in the first quarter. The Strategy posted gains in 5 of the nine sectors in which it was invested on an absolute basis. Overall stock selection detracted from performance, partially offset by positive sector allocation effects on a relative basis. In addition, please check the fund’s top five holdings to know its best picks in 2024.
ClearBridge Small Cap Growth Strategy featured stocks MicroStrategy Incorporated (NASDAQ:MSTR) in the first quarter 2024 investor letter. Headquartered in Tysons Corner, Virginia, MicroStrategy Incorporated (NASDAQ:MSTR) provides artificial intelligence-powered enterprise analytics software and services. On April 9, 2024, MicroStrategy Incorporated (NASDAQ:MSTR) stock closed at $1,441.02 per share. One-month return of MicroStrategy Incorporated (NASDAQ:MSTR) was -18.41%, and its shares gained 346.37% of their value over the last 52 weeks. MicroStrategy Incorporated (NASDAQ:MSTR) has a market capitalization of $24.451 billion.
ClearBridge Small Cap Growth Strategy stated the following regarding MicroStrategy Incorporated (NASDAQ:MSTR) in its first quarter 2024 investor letter:
“While large cap benchmarks get a lot of attention for a handful of mega cap stocks driving the lion’s share of performance, we would highlight even more extreme and unprecedented concentration in small cap benchmarks. Year to date, one stock, Super Micro Computer has driven 37% of the return of the benchmark, closely followed by MicroStrategy Incorporated (NASDAQ:MSTR), a unique stock that is largely considered a bitcoin proxy. Together, they accounted for over half of the benchmark’s first quarter return. This compares to Nvidia, which accounted for 24% of the return of the S&P 500 Index. The 32 top-performing stocks in the Russell 2000 Growth Index accounted for 100% of its return, versus 81 names driving the S&P 500’s performance this quarter.
Currently, SMCI is the largest constituent by weight in our benchmark, and it peaked at over 4.5%, representing the largest individual security weight in a monthly dataset going back to 1985. That represented a weighting 83% higher than the second-largest weight (from 1999). Moreover, MicroStrategy at its peak this past quarter would have represented the fourth-largest security in the 38 years of the monthly dataset. We are hard-pressed to recall another instance where the largest constituent of our benchmark was also added to the S&P 500, as SMCI was this March. We would note that SMCI currently is a $61 billion market capitalization company and MicroStrategy boasts a market capitalization of $28 billion, both well above the $6.8 billion weighted average market cap of the Strategy.
Enthusiasm for AI and bitcoin have fueled this atypical concentration and performance distortion. Bitcoin rallied fast and furiously following the SEC’s approval of the first bitcoin ETF in early January, while the AI infrastructure build-out has had a narrow set of beneficiaries. Against this backdrop, the ClearBridge Small Cap Growth Strategy underperformed its benchmark. We are disappointed by this result, although 79% of the relative underperformance was due to not owning these two large benchmark holdings, which have fundamental and governance factors that have caused us, as long-term investors focused on quality sustainable growth stories, to avoid them.”
A software engineer wearing a headset, collaborating with a remote team on a project.
MicroStrategy Incorporated (NASDAQ:MSTR) is not on our list of 30 Most Popular Stocks Among Hedge Funds. At the end of the fourth quarter, MicroStrategy Incorporated (NASDAQ:MSTR) was held by 16 hedge fund portfolios, compared to 16 in the previous quarter, according to our database.
We discussed MicroStrategy Incorporated (NASDAQ:MSTR) in another article and shared the list of unstoppable tech stocks to buy. In addition, please check out our hedge fund investor letters Q1 2024 page for more investor letters from hedge funds and other leading investors.
Suggested Articles:
- 10 Stocks Receiving a Massive Vote of Approval From Wall Street Analysts
- 10 Unstoppable Dividend Stocks To Buy
- 11 Best Crypto To Invest In For Beginners According To Reddit
Disclosure: None. This article is originally published at Insider Monkey.
