ClearBridge Appreciation Portfolios

ClearBridge Appreciation Portfolios were designed for investors seeking long-term capital appreciation through investments primarily in a core portfolio of high-quality, large-capitalization companies. By investing in a diversified portfolio of growth and value stocks, the managers believe that they are able to position the portfolios to take advantage of changes in economic and market cycles.

Long-term appreciation of capital

We believe that:

• The managers seek to provide consistent and competitive risk-adjusted returns through a market cycle by balancing upside participation in good markets, while trying to limit downside risk during difficult markets. 
• The managers invest in both growth and value stocks, consisting primarily of large-cap, blue chip companies that tend to have dominant market positions and have met environmental, social and governance criteria in the portfolio construction process.

Generally, companies in the portfolio fall into one of the following categories: 

• Companies that have assets or earning power that are undervalued or unrecognized by the market, or companies whose stock price has been driven down by cyclical factors. 
• Companies with superior demonstrated and expected growth characteristics and whose stocks are available at reasonable prices due to temporary market-specific or stock-specific reasons. 
• Companies the managers believe are well positioned to sustain or increase growth at a faster rate than market expectations. 

The managers use a disciplined valuation process that attempts to measure upside potential and downside exposure.

Low-volatility, core holding:

• Balance upside participation in good markets, while trying to limit downside risk during difficult markets 
• Core equities: manager has the flexibility to take advantage of both growth and value oriented markets
• Typically focused on dominant “blue chips”
• Demonstrates both growth and value characteristics
• Great growth companies at reasonable prices

The managers may sometimes hold significant cash reserves as a portion of the portfolio while waiting for buying opportunities.

Diversification does not guarantee a profit or protect against a loss. There is no guarantee that the Portfolio's objectives will be met.

Clear investment philosophy and objective: 

• Seeks long-term appreciation of capital

Disciplined approach to security selection:

• Look for high-margin, lower-leverage companies.
• Focus on balance sheet strength and free cash flow measures.
• Use multiple valuation measures to ensure not overpaying for future growth.
• Occasionally incorporate top-down themes to drive areas for security selection.

Performance risk:

• De-risk business model at security level.
• Aware of active bets at sector and security levels, leveraging ClearBridge Investments risk management team.

Step 1 - Define the Investment Universe

• Emphasize domestic large-capitalization stocks, but also consider mid- and small-capitalization companies and ADRs of non-U.S. companies opportunistically.

Step 2 - Evaluate Stocks using Proprietary Discipline

• Screen for high-quality companies with dominant market positions, proven management teams and/or superior balance sheets across all market sectors. 

Step 3 - Select Securities and Construct Portfolio

• Conduct fundamental research to identify companies with attractive growth characteristics relative to their valuation levels, with a range of 50-80 stocks. 

Step 4 - Review Holdings Continuously

• Re-examine a current holding when valuation is realized, fundamentals deteriorate, insiders are selling and/or cyclical shifts alter industry’s attractiveness.
• The managers may sometimes hold significant cash reserves as a portion of the portfolio while waiting for buying opportunities or to provide a hedge against possible stock market declines. 

The investment process may change over time. The characteristics set forth above are intended as a general illustration of some of the criteria the strategy team considers in selecting securities for client portfolios. There is no guarantee investment objectives will be achieved.

ClearBridge Investments is a well-established global investment manager focusing on proprietary research and fundamental investing. With over 60 years of experience building portfolios for clients seeking income solutions, high active share or low-volatility, long-tenured portfolio managers provide strong leadership in a centralized investment structure.