Q2 24 was a strong up quarter in the S&P 500, with the benchmark returning 4.28% and Stance ESG Large Cap Core returned -3.06% gross and net. The S&P 500 average stock was down -2.76%, and only 25.2% of securities outperformed indicating this is a poor environment for security selection. Stance’s quant and ESG processes yielded investable universes slightly worse than that of the S&P500. NVDA contributed over 1.7% of the benchmark total return.
CAPM Attribution:
The Stance model leaned heavily from market risk this quarter with a beta of 0.63 which is in line for the stance process. This is also an artefact of the increasing concentration among the top 10 S&P500 names, as these weights grow, the Stance Strategy which would more closely track the equally weighted S&P500 will diverge from the market cap weighted S&P500.
Process Attribution:
The securities passing our ESG Screen had an average return of -3.22% with a standard deviation of 11.13% and a hit rate of 23.3%.
The securities selected by our quant model had an average return of -3.50% with a standard deviation of 10.96% and a hit rate of 23.1%.
Statistically these two universes are the same due to the wide standard deviations
Intersecting the two models had an average return of -4.70%, and a hit rate of 19.2%. Our optimizer allocated our weights in a manner that would have allowed us to have a total return of 3.06%, thus adding 1.64%.
Hit Rate was 22.9% in the Final Portfolio vs 25.2% in the S&P 500 universe, showing some selection weakness
Top 5 Contributors: AAPL,T,REGN,TJX,CMG
Worst 5 Contributors: DIS,SBUX,SYY,TRV,WRB
*Total Return Hit – Percentage of stocks that outperformed the SP500TR Index in that period
**Alpha Hit – Percentage of stocks that had a positive alpha, computed using daily returns in that holding period with a rf = 0
*** Combined Hit – Percentage of stocks that had a Total Return Hit AND an Alpha Hit in that holding period
***These numbers are calculated from daily returns generated by using a frictionless simulation of the Stance Strategy and represent gross numbers assuming the strategy was invested on 2024-01-01 and ending on 2024-06-30 with rebalancing occurring on exactly quarter end dates
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PAST PERFORMANCE DOES NOT GUARANTEE FUTURE RESULTS
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The S&P 500® is a market-capitalization-weighted index designed to measure the performance of 500 large-cap U.S. companies. Index performance is discussed for illustrative purposes only as a benchmark for each strategy’s performance and does not predict or depict performance of that strategy. While index comparisons may be useful to provide a benchmark for a strategy’s performance, it must be noted that investments are not limited to the investments comprising the indices. Each of the strategy benchmark indices are unmanaged and cannot be purchased directly by investors.
