ClearBridge Value Fund sold Salesforce and Amdocs in Q1, citing moderating demand and AI spending concerns. Energy overweight boosted returns as oil prices rose on Middle East tensions.
ClearBridge Value Fund sold its stakes in Salesforce and Amdocs during the first quarter. The fund cited moderating demand and concerns that AI-related spending could limit further margin expansion, according to its latest commentary. Both companies are exposed to enterprise IT budgets. Companies are redirecting spending toward AI infrastructure, putting pressure on those budgets.
The fund's performance reflected a sharp divergence between value and growth. The Russell 1000 Value Index returned 2.1% in the quarter. The Russell 1000 Index fell 4.2%, and the Russell 1000 Growth Index dropped 9.8%. The gap between value and growth was nearly 12 percentage points, the widest in several quarters. The first quarter saw heightened volatility. Investors weighed geopolitical shocks and shifting rate expectations. Value stocks held up better than growth.
Energy was the fund's best-performing overweight. Crude oil and natural gas prices jumped. The fund attributed the move to escalating geopolitical tensions in the Middle East. Goldman Sachs estimated Hormuz oil flows at 70% of pre-war levels. The fund said its energy holdings benefited from the price surge. The fund maintained its overweight to the sector, which contributed positively to returns.
Corteva advanced. The fund said tightening global fertilizer markets improved pricing power across the agricultural value chain. Disruptions to natural gas and fertilizer supply chains in the Middle East exacerbated the tightening. Natural gas is a key input for nitrogen fertilizers, and supply disruptions pushed prices higher. Corteva, an agricultural chemical and seed company, gained from the improved pricing environment.
Consumer staples dragged on returns, led by Celsius. The energy drink maker fell after Costco launched a lower-priced private-label alternative, raising fears of demand disruption, according to the fund. Celsius had been a high-growth holding in the fund's consumer staples allocation. The competitive pressure from Costco's Kirkland Signature brand threatens to take market share.
The fund's exit from Amdocs stands out given the stock's weak Alpha Score of 34 out of 100, according to AlphaScala data. The fund cited moderating demand and AI spending concerns for the Amdocs exit. The fund also sold Salesforce, another growth name with exposure to enterprise software spending.
Franklin Resources, the parent company of ClearBridge, manages over $1.4 trillion in assets. The fund sold Salesforce and Amdocs and maintained its energy overweight, according to the commentary.
The fund's energy overweight is its largest sector position, according to the commentary. The next quarterly update is expected in July.
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