361 U.S. Small Cap Equity Fund
October was yet another “risk-on” market environment for equities. All major market indices were in positive territory for the month, and in the U.S., larger cap companies outperformed with the S&P 500 gaining 2.33% compared to the Russell 2000 which was up 0.85%. The 361 U.S. Small Cap Equity Fund generated 1.60% for the month, handedly outpacing the Russell 2000 benchmark. As is typically the case, outperformance was driven by stock selection (as the portfolio is constructed to be sector neutral). In the portfolio, the most robust stock picks for the month were within the Industrials sector, followed by Materials and Consumer Discretionary. Stock selection was lackluster in Health Care.
When viewing the portfolio through the lens of our behavioral models, the strategy performed well over the month—experiencing 292 net positive earnings estimate revisions compared to 8 net negative revisions from a randomly generated portfolio. The impact of earnings estimate revisions within Quintile 1 was strong. The top 20% of companies receiving the most earnings estimate increases outperformed those in the bottom 20% (i.e., those that received the least). Overall, the models performed well during the month, contributing positively to stock selection and ultimately excess return over the benchmark.