Products: Large Cap Growth Equity

Small Cap Growth Equity   •   Large Cap Growth Equity   •   Core Fixed Income   •  Intermediate Fixed Income   •   Short-term Fixed Income  •   Balanced

Investment Manager:

Martin E. LaPrade, CFA
Partner, Equity Portfolio Manager
31 Years of Investment Experience

Phone: (904) 493-5500
Fax: (904) 493-5524

Philosophy
Sawgrass Asset Management’s growth equity product has had a consistent investment philosophy and style since its inception in 1998. The product selects domestic stocks with greater earnings potential than the market. We add value over time by combining quantitative models with bottom-up fundamental research in a consistent and structured investment discipline. Our process identifies companies with strong earnings momentum, rising earnings estimates, and reasonable valuation relative to the Russell 1000 Growth Index. We believe that in combination, these three elements allow us to identify companies early in their cycle of positive change, which offers above average appreciation potential.

Process
Sawgrass applies a time-tested quantitative approach to a universe of 1000 liquid stocks to evaluate bottom-up factors such as earnings momentum, earnings estimates, and valuation.

In addition, we evaluate financial statement data. This approach builds a list of purchase candidates consisting of 100 stocks that all have favorable attributes and have demonstrated their ability to be successful companies. This list is then researched on a fundamental basis to evaluate the viability of continued earnings growth and to uncover influential qualitative elements of each security.

We construct a well-diversified portfolio of 45-55 stocks based on portfolio attribution and fundamental analysis. Our process focuses on specific stock selection and factor emphasis while paying close attention to industry and sector weightings relative to the Russell 1000 Growth Index.

Our sell discipline focuses on four main areas. Companies are sold when earnings expectations start to decline, fundamental factors begin to experience significant changes, more attractive companies are identified, or risk profile realignment is necessary. Particular attention is paid to a stock's change in earnings estimates. Our strategy seeks to avoid stocks with weakening earnings or price trends.

We maintain an active portfolio that seeks to be fully invested with less than 5% in cash. No options or leverage is employed.

2nd Quarter 2008 Stock Market Commentary

Market Review:

The stock market continued its rollercoaster ride during the second quarter. By mid-May, the S&P 500 had risen almost 9% only to give back all its gains ending the quarter with a loss of 2.7%. It was a tale of two markets as energy stocks were up 17+%, while financials continued their decline down 18+% for the quarter (30+% year to date). Growth stocks, led by energy and technology, outperformed the financial heavy value indexes. Surprisingly, smaller stocks outperformed larger stocks with the midcap area leading the way. The state of U.S. financial companies continue to deteriorate as energy and commodity prices sharply rose. Concerns regarding the health of Fannie Mae and Freddie Mac also weighed heavily on the stock market. After five consecutive calendar years of positive returns, the first half of 2008 makes six consecutive years a challenge.

Portfolio Review :

The second quarter of 2008 continued to be challenging for our portfolio. While we have structured the portfolio in a more defensive posture given the concerns of the financial industry, this has not paid off as energy and materials stocks continued to perform well. Interestingly, the more stable growers were not rewarded during this period. It also did not help that most valuation characteristics did not perform well either. Our tilt toward larger companies also hurt as the midcap companies performed very well. Given these biases in our portfolio, our overall stock selection was poor. While we did avoid the weak financial companies and many of our healthcare stocks bounced back, it was not enough to offset the other areas of weakness.

Outlook:

The third quarter has begun on a sour note as concerns over Fannie and Freddie grow. It is, however, unlikely that these entities will be allowed to fail. Given the relentless decline since the mid-May highs, the market seems ripe for a short-term bounce. While a bounce may be probable, we would prefer to see some evidence of healing in the banks, brokers, and mortgage companies before we commit to a more offensive posture. It seems likely that energy and commodities will have to eventually peak as demand destruction results from higher prices. While not rewarded in the second quarter, we do believe the stable growers will come to the surface as the economic pace inevitably slows. We continue to be modestly overweighted in technology, though we are concerned over a possible slowdown in capital spending sensitive companies. On the whole, we are positioned for the larger, stable growers to pay off and anticipate that time when we can play a more offensive game.