During the third quarter, the US Equity Income Fund's returns were below its benchmark, the Russell 1000 Value Index, after accounting for fees. This period saw varied performances from different holdings, with some contributing positively and others negatively to the fund's overall results. The strategic adjustments made by the fund reflect its proactive approach to navigating market dynamics and identifying opportunities for long-term growth and value creation.
Oracle Corporation emerged as a significant positive influence on the fund's relative performance, primarily due to its remarkable backlog expansion and an ambitious long-term revenue forecast, largely attributed to its strong positioning in AI workloads. Conversely, Kenvue Inc., a consumer healthcare company, experienced a downturn, becoming a major drag on the fund's relative returns. In a move to capitalize on market opportunities, the fund acquired shares in D.R. Horton, Inc., a homebuilding enterprise. This investment was based on the company's compelling valuation and the expectation that it would benefit from ongoing consolidation within the housing sector.
The fund also undertook strategic divestitures, liquidating its positions in Wells Fargo and Accenture. The decision to exit Wells Fargo stemmed from apprehensions regarding its net interest income and loan growth prospects. Meanwhile, the divestment from Accenture was prompted by the potential risks associated with AI-driven disruption and the macroeconomic uncertainties affecting the demand for IT services and their valuation multiples. The fund's forward-looking perspective also includes monitoring Honeywell's impending corporate split, anticipating improved strategic focus and unlocking value in automation and energy transition, despite near-term margin pressures and market skepticism.
In a rapidly evolving economic landscape, diligent portfolio management, focused on both capitalizing on growth opportunities and mitigating risks, is essential. The fund's strategic decisions underscore a commitment to adapting to changing market conditions, ensuring that investments align with a vision for sustained positive impact and robust returns.