BBH U.S. Large Cap Equity Monthly Update – November 2022

November 30, 2022
Portfolio Manager, Nicholas Haffenreffer, discusses how the U.S. Large Cap Equity portfolio companies performed over the most recent month-end.

Equity markets rallied sharply in November after responding favorably to declines in inflation, Treasury yields, commodity prices, and the U.S. Dollar. For the month, the BBH US Large Cap Equity Composite (“US Large Cap Equity” or “the Strategy”) gained 7.87%, outperforming the 5.59% gain of the benchmark S&P 500 Index. At the sector level, the Information Technology and Consumer Discretionary sectors exhibited relative strength while the Financials and Communication Services sectors underperformed. The top contributor for the month was semiconductor capital equipment and solutions provider KLA Corp. (KLAC, 24.67%) while the primary detractor was regional banking franchise Signature Bank (SBNY, -12.00%). At the Strategy level, allocation (+30 basis points1) and selection (+192 basis points) were both positive. We added to existing positions in specialty chemical manufacturer Celanese (CE) and semiconductor manufacturer Texas Instruments (TXN). The portfolio concluded the month with 29 holdings, 5.2% cash, and a price to our estimate of intrinsic value2 of 79%.

KLA Corporation’s share price appreciated meaningfully during the month as investors took a more favorable view of chip stocks due to earnings reports in late October that were better than expected. Semiconductor stocks performed well in general as measured by the SOX Index;3 KLA and its Wafer Fabrication Equipment industry peers performed particularly well within the group. KLA reported a “beat-and-raise” quarter where management suggested the company has not yet experienced early indications of a cyclical downturn that usually causes customers to delay acceptance of equipment or cancel orders. Despite a consensus view of an impending cycle, KLA continued its strong performance from earlier in the year. In addition to earnings-related performance, shares continued their positive reaction to October’s news that the U.S. would prohibit the export of chips and high-end chipmaking equipment to certain customers in China. The release of specific criteria from the U.S. Commerce Department helped quantify KLA’s exposure to the export controls and served as a clearing event for shares by narrowing the uncertainty around impending regulations. Beyond cyclical and geopolitical concerns, we continue to believe KLA will maintain a leading position in this essential industry.

Signature Bank’s stock price has been under intense pressure throughout the year and November was no exception. This pressure reflects a misunderstanding of the company’s exposure to the crypto ecosystem and disregards the fundamental strengths of the business. Of the bank’s $103 billion in deposits at the end of the third quarter, roughly $23 billion emanated from participants in the cryptocurrency and blockchain space; Those deposits came from exchanges, institutional and retail traders, and balances backing stablecoins.4 All of the deposits are dollar denominated so the company has no exposure to cryptocurrency price volatility. In addition, Signature has no credit risk associated with crypto and does not act as a custodian for crypto-related assets, nor as a fiduciary for crypto investors. Nevertheless, the turmoil engulfing the crypto ecosystem this year has raised concerns about the cost and durability of Signature’s crypto-related deposits. Given the uncertain trajectory of the crypto markets, Signature has elected to reduce its exposure to the space by running off $8 billion to $10 billion of crypto-related deposits. The company is able to fund the runoff with $7 billion of excess cash on hand and borrowings from the Federal Home Loan Banks. It is worth noting liquidity is not an issue as Signature has over $33 billion of untapped borrowing capacity – enough to fund the runoff of all its crypto deposits. Despite all the volatility in its crypto deposits, the company’s underlying results have been sound. Signature’s credit quality remains excellent, the balance sheet is well capitalized and liquid, revenues are up over 40%, and earnings per share are up over 50%. It is likely that running off a substantial portion of its crypto deposits will cause the company’s earnings to decline modestly in 2023. Even taking that decline into consideration, the company’s shares are trading for under seven times next year’s expected earnings – a valuation we think is exceptionally compelling.

While we are pleased to see equities and the Strategy benefit from a strong recovery in November, we recognize it has been, and will likely continue to be for some time, a challenging investment environment characterized by persistent inflation, higher interest rates, elevated geopolitical tensions, and slowing economies around the globe. Our focus will always remain on businesses characterized by durable cash flow and earnings growth, healthy balance sheets, and attractive valuations. We believe the Strategy represents compelling value and is well-positioned to generate attractive returns through the business cycle.

  Total Returns Average Annual Total Returns
As of 11/30/2022 1 Mo.* 3 Mo.* YTD* 1 Yr. 3 Yr. 5 Yr. 10 Yr. Since
BBH U.S. Large Cap
Equity Composite (Gross of Fees)
7.87% 3.73% -16.25% -10.80% 7.22% 8.53% 10.44% 9.92%
BBH U.S. Large Cap
Equity Composite (Net of Fees)
7.79% 3.48% -17.03% -11.69% 6.16% 7.46% 9.36% 8.84%
S&P 500 5.59% 3.63% -13.10% -9.21% 10.91% 10.98% 13.34% 9.42%
As of 09/30/2022 1 Mo.* 3 Mo.* YTD* 1 Yr. 3 Yr. 5 Yr. 10 Yr. Since
BBH U.S. Large Cap
Equity Composite (Gross of Fees)
-9.44% -6.77% -26.88% -17.70% 3.68% 6.58% 9.05% 9.15%
BBH U.S. Large Cap
Equity Composite (Net of Fees)
-9.52% -7.01% -27.45% -18.53% 2.66% 5.53% 7.98% 8.07%
S&P 500 -9.21% -4.88% -23.87% -15.47% 8.16% 9.24% 11.70% 8.67%
Past performance does not guarantee future results.
* Returns are not annualized. The BBH US Large Cap Equity Composite inception date is 10/01/2005.
Sources: BBH & Co. and S&P
The S&P 500 is an unmanaged weighted index of 500 stocks providing a broad indicator of stock price movements.
The composition of the index is materially different than the Strategy’s holdings. The index is not available for direct investment.

Representative Account
Equity Weighting
As of November 30, 2022

Common Stocks


Cash & Cash Equivalents


Total 100%

Representative Account
Portfolio Characteristics
As of November 30, 2022

Composite Assets (mil) $768.6

Number of Securities Held


Average P/E


Average Market Cap (bil)


Turnover (Rolling 12-Months)


Exclude cash equivalents

Representative Account
Sector Weighting
As of November 30, 2022

Communication Services 6.4%
Consumer Discretionary 10.7%
Consumer Staples 8.1%
Energy 0.0%
Financials 20.6%
Health Care 13.7%
Industrials 12.3%
Information Technology 21.0%
Materials 7.2%
Real Estate 0.0%
Utilities 0.0%
Total 100.0%
Reported as a percentage of portfolio securities, excluding Cash and Cash Equivalents.

Representative Account
Top Ten Companies
As of November 30, 2022

Berkshire Hathaway Inc
Alphabet Inc
Mastercard Inc
Linde PLC
Arthur J Gallagher & Co
Progressive Corp
Alcon Inc
Microsoft Corp
Costco Wholesale Corp
Waste Management Inc
Total 46.9%
Reported as a percentage of total portfolio.

1  One “basis point” or “bp” is 1/100th of a percent (0.01% or 0.0001).
2  BBH’s estimate of the present value of the cash that a business can generate over its remaining life.
3  The PHLX Semiconductor Sector Index (SOX) is a modified market capitalization-weighted index composed of companies primarily involved in the design, distribution, manufacture, and sale of semiconductors.
4  Stablecoins are cryptocurrencies whose value is pegged to that of another currency, commodity, or financial instrument.

Holdings are subject to change. Totals may not sum due to rounding.

Price/Earnings (P/E) ratio is a company’s current share price divided by earnings per-share.

Turnover ratio is the rate of trading in a portfolio; higher values imply more frequent trading.

Opinions, forecasts, and discussions about investment strategies represent the author’s views as of the date of this commentary and are subject to change without notice. References to specific securities, asset classes, and financial markets are for illustrative purposes only and are not intended to be, and should not be interpreted as recommendations.

Purchase and sale information provided should not be considered as a recommendation to purchase or sell a particular security and that there is no assurance, as of the date of publication, that the securities purchased remain in a strategy’s portfolio or that securities sold have not been repurchased.


Investors should be able to withstand short-term fluctuations in the equity markets in return for potentially higher returns over the long term. The value of portfolios changes every day and can be affected by changes in interest rates, general market conditions and other political, social and economic developments. Each investor should evaluate their ability to invest for the long-term, especially during periods of downturn in the market.

The strategy may assume large positions in a small number of issuers which can increase the potential for greater price fluctuation.

Foreign investing involves special risks including currency risk, increased volatility, political risks, and differences in auditing and other financial standards.

The Representative account is managed with the same investment objectives and employs substantially the same investment philosophy and processes as the strategy. Contribution figures are of the Representative Account and do not include cash and cash equivalents. Performance of the Representative account is available upon request.

Brown Brothers Harriman Investment Management (“IM”), a division of Brown Brothers Harriman & Co (“BBH”), claims compliance with the Global Investment Performance Standards (GIPS®). GIPS® is a registered trademark of CFA Institute. CFA Institute does not endorse or promote this organization, nor does it warrant the accuracy or quality of the content contained herein. To receive additional information regarding IM, including a GIPS Composite Report for the strategy, contact Craig Schwalb at (212) 493-7217, or via email at

Gross of fee performance results for this composite do not reflect the deduction of investment advisory fees. Actual returns will be reduced by such fees. Net of fees performance results reflect the deduction of the maximum investment advisory fees. Returns include all dividends and interest, other income, realize and unrealized gain, are net of all brokerage commissions and execution costs. Results will vary amount client accounts. Performance calculated in U.S. dollars.

The Composite is fully discretionary, fee-paying accounts over $5 million that invest in a portfolio of approximately 25-35 companies with market capitalizations greater than $5 billion that are headquartered in North America, as well as in certain global firms located in other developed regions. This strategy is benchmarked to the S&P 500 Index.

Brown Brothers Harriman & Co. (“BBH”) may be used as a generic term to reference the company as a whole and/or its various subsidiaries generally. This material and any products or services may be issued or provided in multiple jurisdictions by duly authorized and regulated subsidiaries. This material is for general information and reference purposes only and does not constitute legal, tax or investment advice and is not intended as an offer to sell, or a solicitation to buy securities, services or investment products. Any reference to tax matters is not intended to be used, and may not be used, for purposes of avoiding penalties under the U.S. Internal Revenue Code, or other applicable tax regimes, or for promotion, marketing or recommendation to third parties. All information has been obtained from sources believed to be reliable, but accuracy is not guaranteed, and reliance should not be placed on the information presented. This material may not be reproduced, copied or transmitted, or any of the content disclosed to third parties, without the permission of BBH. All trademarks and service marks included are the property of BBH or their respective owners. © Brown Brothers Harriman & Co. 2022. All rights reserved.

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IM-12142-2022-12-22 Exp. Date 01/31/2023


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