Darden Capital Management Reveals Top Stock Picks That Led Investments to Surpass $20M

After another quarter of impressive returns, Darden Capital Management’s (DCM) assets under management have hit a new milestone, surpassing $20 million at the close of 2019. The assets are managed entirely by students at the University of Virginia Darden School of Business and represent an important piece of the School’s endowment.

According to the fourth quarter 2019 edition of The Advisor, the quarterly investment update issued by the student-run DCM, the group’s portfolio managers generated healthy returns in a strong market by adhering to what DCM CEO, Church Waesche (Class of 2020), described as the group’s core competency — bottom-up fundamental stock picking.

While 2019 began with a number of potentially negative macro trends generating headlines in the financial press, including slowing global GDP growth and an ongoing trade war between the United States and China, Waesche said DCM’s Portfolio Managers largely tuned out the noise and remained focused on the prospects for individual stocks.

Wrote Waesche, “The continued strong performance is a testament to DCM’s investment process, which encompasses deep fundamental research, spirited team debate, and thoughtful, collaborative decision-making.”

DCM, which functions at Darden as both an independent study course and a club and is supported by the Richard A. Mayo Center for Asset Management, began in 1990 with $250,000 in seed money from the Darden School’s endowment. Despite no shortage of market turmoil — including the dot-com crash and the Great Recession, assets under management have grown dramatically, both adding to the Darden endowment and providing invaluable hands-on asset management experience for generations of students — many of whom continue to work in asset management after graduation.

DCM manages five funds, and each showed healthy growth in 2019. The Advisor details performance data since March 2019, when the current group of portfolio managers took the reins.

• The Cavalier Fund, a long/short fund which focuses primarily on domestic equities, returned 20.4 percent under the current leadership team from 1 March 2019 to 31 December 2019. This compares to 15.7 percent for its benchmark, the S&P 500, over the same period. Apple, Charter Communications and HCA Healthcare were the largest contributors to the year’s growth, and Apple now represents the third-largest position in the portfolio. The fund managers bought four new stocks in the quarter, including Nexstar Media Group and Spotify.
• The Darden Fund, which focuses on small-cap stocks, was up 3.1 percent in the nine months ended 31 December 2019 as the small-cap universe continued to underperform relative to large caps during the year. The fund took new positions in Revolve Group and YETI in November 2019, and both are up significantly since purchase.
• The Jefferson Fund, which focuses on value investing, returned 16.2 percent during the nine months ended 31 December 2019, topping its benchmark, the Russell 1000 Value, which returned 13.0 percent during the same period. The fund’s top performer, Microsoft, was up more than 44 percent. The fund added General Dynamics and Wheaton Precious Metals to its portfolio in 2019. Portfolio Manager Adrian Moral (Class of 2020) said the fund has struggled to find room for new ideas in the portfolio, and going forward the Jefferson Fund team plans to evaluate existing investments in conjunction with assessments of new ideas.
• The Monticello Fund, which primarily focuses on global companies, returned 18.5 percent in the final nine months of 2019, besting its benchmark, the MSCI ACWI, which returned 13.9 percent. The growth was led by Apple, which was up 68 percent in the period. In the fourth quarter, the fund managers added new positions in Alphabet, General Electric and Intuitive Surgical. In the current quarter, the fund is analyzing at least nine new businesses to potentially add to the portfolio.
• The Rotunda Fund, which focuses on investments through an environmental, social and governance (ESG) lens, returned nearly 8 percent in the fourth quarter and was up 15.5 percent for the final nine months of 2019. The fund’s top recent performers have included PVH Corporation, CBRE Group and CVS Health. The fund added a position in Ulta Beauty in the fourth quarter of 2019.

Read the entire issue of The Advisor, including deep dives into fund performance, stock pick highlights from 2019, and an interview with Blue Hawk Investment Group Founder and Managing Member Jake DuBois (MBA ’16).