Following the election, we saw a meaningful divergence between the performance of growth and value stocks as the sectors deemed to be the greatest beneficiaries of the incoming administration's policy proposals tend to be more value oriented. Sectors where we have limited exposure, such as financials, energy, and industrials and business services, got a significant boost, while growth-oriented sectors that make up the bulk of our portfolio lagged. Nonetheless, we remain steadfast in our approach and continue to focus on fundamentals and growth relative to valuations.

Information Technology

We continue to seek attractive opportunities in companies with innovative business models that can take advantage of transformational change. We favor companies with durable business models that address large and growing markets, including Internet search and advertising, electronic payment processing, and social connectivity. We are also emphasizing companies that will benefit from secular demand for public cloud computing services.

• We increased our position in Microsoft as we believe the company's continued evolution to cloud computing remains on track. The company's recent acquisition of LinkedIn should also be additive to Microsoft's core Office franchise. We believe the software giant is also improving its market positioning, execution, long-term prospects, and capital allocation management.
• Tech giant Apple is a high-quality and well-managed company with a strong track record of innovation; however, we trimmed our position in the stock given our belief that a decelerating product cycle will eventually weigh on growth, and it is unclear whether the company's new products and services will be enough to sustain above-average profit growth moving forward. Uncertainty surrounding U.S. President-elect Trump's trade policies toward China, where Apple manufactures many of its devices, could also serve as a headwind to the company.

Consumer Discretionary

We remain optimistic about stock-specific opportunities within the consumer discretionary sector. Consumer confidence has been bolstered by an improving labor market, rising wages, and lower gas prices. We favor businesses benefiting from the secular shift of consumer spending to online retail. We are also focused on companies positioned to benefit from the long-term growth in online travel services.

• Yum! Brands, the parent company of Taco Bell, KFC, and Pizza Hut, spun off its China business during the period. Following the spinoff, we bought shares of the legacy enterprise. We are positive on the company's refranchising initiatives, which we believe can lead to higher margins, a more stable cash flow stream, and more capital being returned to shareholders.
• We sold shares of Hanesbrands during the quarter on concerns that the vertically integrated and owned supply chain model is becoming increasingly less efficient with more acquisitions. We also believe the company is exposed to negative tax reform optionality. Thus, we redeployed the proceeds of the sale to fund investments with stronger upside potential.

Health Care

We are currently pursuing select therapeutics and medical device companies in the health care sector that we believe have limited exposure to potential regulatory reform. Therapeutics companies that have broad pipelines and innovative treatments that meaningfully improve patient survival rates are likely to face less pressure on drug pricing. We are also emphasizing managed care companies positioned to benefit from industry consolidation as well as the increasing focus on providing cost-effective solutions. Companies that develop innovative medical devices and equipment represent another attractive long-term growth opportunity.

• We bought shares of biotechnology firm Biogen as we believe the company has significant medium- and long-term growth potential in several of its pipeline programs. We expect Spinraza, a recently approved treatment for all types of spinal muscular atrophy, to be accretive to earnings starting in 2017. The firm also has a steady base business of multiple sclerosis treatments, including Tecfidera, which should be a reliable revenue generator for the next several years.

• We trimmed our position in Allergan during the period; however, we still maintain a constructive view of the company as we believe it is well positioned to deliver organic growth from several of its business segments. More streamlined operations following the sale of its generic drug business in the third quarter of 2016, along with a number of upcoming product launches, could also bode well for the firm's long-term earnings growth.