BBH U.S. Large Cap Equity Monthly Update – August 2020

August 31, 2020
Portfolio Manager, Michael Keller, discusses how the U.S. Large Cap Equity portfolio companies performed over the most recent month-end.

In August 2020, BBH U.S. Large Cap Equity* Composite (“the Strategy”) rose by 4.81%, which compared to a gain of 7.19% for the S&P 500 Index. Our top performer in the month was Mastercard and our largest detractor was Diageo. We initiated a position in, Inc., the world’s largest e-commerce and cloud computing provider, and we exited our position in Unilever.

Mastercard reported Q2 results that were negatively impacted by restrictions related to COVID-19 and the general macroeconomic slowdown. The 26% decline in operating profit for the quarter reflected a de-leveraging against fixed expenses, but less severe than we had contemplated. Nevertheless, the quarter’s operating profit margin was still strong at nearly 52%. Growth in Mastercard’s differentiated services strategy remains exceptional and should continue to be a durable top-line contributor given that electronic payments generate more data than cash and check transactions. As such, with card-based payments continuing to gain share, Mastercard’s clients will increasingly consume the analytics and security tools offered by the company’s value-added services. In the face of currently steep revenue declines related to the pandemic, we believe that Mastercard’s competitive position and importance to customers is strengthening.

Diageo reported results that were relatively solid considering the environment, with the U.S. – where spirits and beer sales are 20% on-premise – showing particular resilience. Most other regions faced steep volume declines due to a mix of forced closures, government sale/manufacturing prohibitions, and social distancing measures. Overall organic volume declines drove substantial de-leveraging of fixed costs and resultant pressures on consolidated gross margin. This in turn suppressed organic operating margins, leading to a 14% organic profit decline for the full year. Management deferred certain discretionary spending and put in place incremental productivity initiatives, but not to a degree that could fully offset cost headwinds. Despite current challenges, we continue to believe Diageo can leverage its strong product lineup and its in-market infrastructure to take advantage of the increasing penetration of Western spirits in the developing world and the ongoing premiumization tailwind across the industry over time.

BBH Core Select Composite Gross and Net of Fees versus the S&P 500 benchmark as of August 31, 2020 and June 30, 2020.
  Total Returns Average Annual Total Returns
As of 08/31/2020 1 Mo.*
3 Mo.* YTD* 1 Yr. 3 Yr. 5 Yr. 10 Yr.
Since Inception
BBH U.S. Large Cap Equity Composite (Gross of Fees)
4.81% 10.19% 3.57% 10.29% 10.63% 10.94% 12.99% 10.28%
BBH U.S. Large Cap Equity Composite (Net of Fees)
4.73% 9.93% 2.88% 9.21% 9.54% 9.85% 11.88% 9.20%
S&P 500
7.19% 15.48% 9.74% 21.94% 14.52% 14.46% 15.16% 9.53%
As of 06/30/2020 1 Mo.*
3 Mo.* YTD* 1 Yr. 3 Yr. 5 Yr. 10 Yr. Since Inception
BBH U.S. Large Cap Equity Composite (Gross of Fees)                              
-0.82% 15.89% -6.78% 1.02% 7.18% 8.26% 12.11% 9.62%
BBH U.S. Large Cap Equity Composite (Net of Fees)
-0.90% 15.61% -7.25% 0.02% 6.12% 7.19% 11.00%
S&P 500                               
1.99% 20.54% -3.08% 7.51% 10.73% 10.73% 13.99% 8.72%
* Returns are not annualized.
Sources: BBH & Co. and S&P
Past performance does not guarantee future results, and current performance may be lower or higher than the past performance data quoted. The investment return and principal value will fluctuate, and shares, when sold, may be worth more or less than the original cost.
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 August 31, 2020. Equity weighting to include Common Stock and Cash and Cash Equivalents.
Representative Account
Equity Weighting
As of August 31, 2020
Common Stock 99.0%
Cash and Cash Equivalents 1.0%
Representative Account Portfolio Characteristics as of August 31, 2020, includes Composite Assets, Number of Securities, Average Price/Earnings, Market Cap and Turnover
Representative Account
Portfolio Characteristics
As of August 31, 2020
Composite Assets (mil)
Number of Securities Held 30
Average P/E 31.4
Average Market Cap (bil) $175.0
Turnover (Rolling 12 Months)
Exclude cash equivalents.
Composite Risk Statistics as of August 31, 2020.
Composite Risk Statistics
As of August 31, 2020
Beta 0.87
Alpha -1.89%
Tracking Error 4.62%
Upside / Downside Capture 80.8% / 92.5%
Risk statistics are reported gross of fees and are based on trailing 60 months.
Representative Account Sector Weighting as of August 31, 2020.
Representative Account
Sector Weighting
As of August 31, 2020
Communication Services
Consumer Discretionary
Consumer Staples
Financials 13.0%
Health Care 18.0%
Industrials 13.3%
Information Technology
Real Estate 0.0%
Utilities 0.0%
Reported as a percentage of portfolio securities.
Representative Account Top 10 Companies as of August 31, 2020.
Representative Account
Top 10 Companies
As of August 31, 2020
Alphabet Inc
Berkshire Hathaway Inc 
Copart Inc 5.1%
Oracle Corp 5.0%
Mastercard Inc
Zoetis Inc 4.8%
Arthur J Gallagher & Co
Linde PLC 3.9%
Alcon Inc 3.5%
Fleetcor Technologies Inc 3.4%
Reported as a percentage of total portfolio.

* Previously called the BBH Core Select Strategy.

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.

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 fund'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.  

Data presented is that of a single representative account ("Representative Account") that invests in the strategy. It is the largest account as of the end of the most recent quarter that is managed with the same investment objectives and employs substantially the same investment philosophy and processes  as the strategy.

For purpose of complying with the GIPS® standards, the firm is defined as Brown Brothers Harriman Investment Management ("IM"). IM is a division of Brown Brothers Harriman & Co. ("BBH"). IM claims compliance with the Global Investment Performance Standards (GIPS®). To receive a list of composite descriptions of IM and/or a presentation that complies with the GIPS standards, 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. Time Weighted Rate of Return is used to determine performance of a portfolio in a Composite. A portfolio's rate of return is the percentage change from the beginning balance to the ending balance of the period. Capital changes as well as dividends and other income earned during a period are included in the ending balance. Any reinvestment of dividends or other income will be reflected in the beginning balance of the following period. Sub-periods returns are linked to calculate a portfolio return for the period. Performance calculated in U.S. dollars.

The Composite is a 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. On 10/1/2020 the BBH Core Select – US Large Cap Composite was renamed the U.S. Large Cap Equity Composite. 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. 2020. All rights reserved.

Not FDIC Insured        No Bank Guarantee        May Lose Money

IM-08436-2020-09-14   Exp Date 10/31/2020

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