The ClearBridge Growth Strategy significantly outperformed its benchmark during the third quarter of 2025, demonstrating the efficacy of its diversified investment approach. This success was not merely a result of strong performance in a few key areas but rather a broad-based contribution from various sectors and thematic bets, including artificial intelligence, cryptocurrency, defense spending, and consumer trends. The strategy’s continuous adaptation to market dynamics, by both capitalizing on emerging opportunities and mitigating risks, has been central to its consistent outperformance.
Key to this strategy is a disciplined portfolio management philosophy that involves trimming positions that have seen substantial valuation increases and reallocating capital into new, high-conviction opportunities. This dynamic rebalancing, coupled with a focus on companies with strong growth potential and resilient business models, positions the portfolio to navigate fluctuating market conditions. The approach emphasizes capturing upside during bullish periods while also providing crucial downside protection when volatility increases, ensuring sustainable long-term returns for investors.
Strategic Portfolio Management and Market Outperformance
The ClearBridge Growth Strategy achieved strong results in the third quarter of 2025, outperforming its benchmark, the Russell Midcap Growth Index. This success was fueled by broad participation across the portfolio, highlighting the benefits of a diversified investment approach rather than over-reliance on a few dominant stocks. The strategy capitalized on prevailing market optimism driven by favorable trade outcomes, legislative progress, anticipated interest rate reductions by the Federal Reserve, and robust corporate earnings. Key thematic exposures, particularly in artificial intelligence (AI) and cryptocurrency, provided significant momentum. Holdings such as Broadcom, AppLovin, Palantir, and Robinhood delivered substantial gains, underscoring the portfolio's effective positioning in leading growth areas. Beyond technology, the strategy also saw strength in financials and industrials, with L3Harris benefiting from increased defense spending and TKO securing a lucrative deal for its UFC rights, further demonstrating the breadth of its success. While some consumer discretionary holdings experienced headwinds due to macro uncertainty, the portfolio’s overall underweight in this sector helped mitigate potential negative impacts, reinforcing the value of its balanced and disciplined management.
The portfolio's outperformance was primarily attributable to strong stock selection and strategic sector allocation. Broadcom, a long-term holding and top position, notably excelled due to its leadership in custom silicon for AI applications, securing a fourth major customer for its specialized XPU chips. Palantir also made significant contributions by leveraging its infrastructure software capabilities to benefit from the accelerating adoption of AI across various industries. In financials, Robinhood experienced substantial share growth driven by heightened interest in cryptocurrency and successful new product launches. The strategy's success extended into industrials, where defense contractor L3Harris benefited from increased demand for air and missile defense systems, as well as investments in communication and space technologies. Media company TKO also delivered a strong quarter, securing a valuable seven-year deal for its UFC rights. Despite some weakness in consumer discretionary stocks like Chipotle, CAVA, and Airbnb, the strategy’s strategic underweight in this sector helped maintain overall positive performance. Strong performance from consumer staples such as off-priced retailer TJX, which achieved new highs with strong same-store sales and margin expansion, exemplified the strategy’s focus on resilient and durable compounders. These diverse contributors underscore the strategy's balanced approach, which extends beyond singular high-growth themes like AI and crypto to ensure robust and consistent performance.
Adapting to Evolving Markets: New Opportunities and Risk Management
Maintaining its disciplined approach, the ClearBridge Growth Strategy actively managed its portfolio by routinely trimming high-performing stocks and reinvesting capital into emerging opportunities with compelling risk-reward profiles. In the third quarter, the strategy expanded its diversification by adding four new positions across different sectors. Notable additions included On Holding, a Swiss designer of premium footwear and apparel, positioned to capture further market share through brand expansion and diversification into new sports categories. Roblox, a leading user-generated gaming platform, was also added, expected to drive strong revenue growth through improved discovery algorithms, AI-driven game development, and expansion into older user demographics and international markets. In healthcare, Natera, a molecular diagnostics company specializing in cell-free DNA testing, was included for its long-term growth potential in minimal residual disease (MRD) testing and its profitable women's health business. Finally, XPO, a major North American less-than-truckload (LTL) provider, was added to enhance cyclical growth exposure, with expectations of margin expansion driven by new leadership and improved service levels. This proactive rebalancing and focus on diverse, high-potential companies illustrate the strategy's commitment to adapting to market changes and optimizing its growth drivers.
Beyond adding new positions, the strategy also demonstrated prudent risk management by exiting holdings where the investment thesis had changed. This included the divestment of UnitedHealth Group, a long-standing position that had previously delivered steady returns. The decision was driven by challenges in its Medicare Advantage business, increased cost pressures, and regulatory risks, despite its historically strong performance. Although the company’s new CEO offered some optimism, concerns about the time needed to address issues within its health services unit, Optum, led to the exit. Additionally, IT consultant Accenture was exited due to spending cuts affecting its federal business and uncertainties surrounding its fiscal year outlook. Capital from these exits was reallocated into higher-conviction opportunities such as Axon and Howmet Aerospace, reflecting the strategy’s continuous commitment to optimizing its portfolio for attractive risk-reward profiles. Looking forward, the strategy remains focused on maintaining a balanced portfolio designed to capitalize on strong market conditions while also providing downside protection during periods of volatility. While a more optimistic monetary and regulatory environment is anticipated for 2026, the strategy remains vigilant regarding economic and geopolitical risks that could impact market momentum, ensuring a robust and adaptable investment posture.