Within the portfolio, our positioning is mainly driven by fundamental, stock-specific views. The turbulent environment offered us the opportunity to upgrade the quality of our holdings within certain sectors. During the quarter, we selectively added to high-quality names with attractive valuations and strong balance sheets. Conversely, we trimmed names where we did not have complete confidence in their balance sheets or where we found better risk/reward ideas. We will continue to look for high-quality companies that have opportunities to increase their market share or that have barriers to entry around their business that will allow them to grow organically in a variety of market environments.

Health Care

We have a favorable view of the health care sector as we believe the space offers compelling long-term return algorithms, low business model volatility, and relatively stable growth potential that can perform well over the long term. We favor companies that are well positioned to take advantage of long-term trends by offering highly innovative products. We have found intriguing investment opportunities in health care providers and services and biotechnology industries, among others.

• HCA Healthcare is the largest publicly traded hospital operator in the U.S. We sold out of our holding, as we saw the lucrative benefits that HCA had derived from the coronavirus pandemic begin to wane, and we wanted to book profits and reinvest in a higher conviction name, albeit another COVID beneficiary, Quest Diagnostics.
• Quest Diagnostics is one of the largest independent clinical laboratories and diagnostic testing companies in the U.S. Given its scale, Quest was and is a central player in COVID testing. We appreciate management's focus on sustaining growth rates while transitioning the business to a post-COVID environment. We believe Quest has opportunities to leverage their advanced diagnostic capabilities as well as to grow their direct consumer testing franchise.
• Within biotechnology, we eliminated our position in AbbVie in favor of Regeneron Pharmaceuticals. Regeneron is a commercial-stage biotechnology company with an attractive biologic treatment portfolio and drug pipeline anchored by blockbusters: retinal disease treatment Eylea and Dupixent, a monoclonal antibody used to treat allergic diseases. Recently, the firm reached an agreement with Sanofi to acquire the full global rights to Libtayo, another promising immuno-oncology drug franchise that Regeneron hopes to extend.

Financials

Within financials, we focus on owning high-quality companies that have strong balance sheets, leading industry positions, and diversified revenue streams. We have positioned the portfolio here to benefit from a rising property and casualty upcycle as well as short-term rate variability. Our largest industry weights are in insurance and banks.

• We bought Progressive, a property and casualty insurance carrier and major player in the personal auto insurance market. We believe that Progressive's competitive advantages, including its low expense ratio, superior data and analytics, and excellent management systems, provide it with higher underwriting leverage and stronger margin potential that, in our view, should drive consistent return growth and a deserved premium valuation versus peers.
• We view swapping out our position in Bank of New York Mellon for a new holding in JPMorgan Chase as a quality upgrade at an attractive risk/reward trade-off within financials. JPMorgan Chase is one of the four largest money center banks in the U.S. with an even mix of retail and wholesale businesses. We favor JPMorgan's scale, robust loan growth, attractive fee businesses, relatively conservative underwriting, and experienced management team in an uncertain macro backdrop.

Utilities

We like the utilities sector because many of the companies offer durable earnings growth potential and strong free cash flow and have longer-term opportunities to benefit from an increase in renewable energy generation and electric grid modernization. Over the quarter, our exposure to the sector increased in both absolute and relative terms.

• On a recent pullback in June, we initiated a position in Ameren, an electric and gas utility company serving Missouri and Illinois. We think that Ameren is a high-quality utility with a long runway for growth, as it has a solid management team, constructive�regulatory jurisdictions, multiple areas for upside optionality including renewables, and a top-tier balance sheet, and, in our view, is well-positioned for an inflationary environment.
• We substantially sold down our holding in XCEL Energy and used the funds to purchase Ameren, which we view as an upgrade in quality in the utility space.

Communication Services

The communication services sector comprises a wide range of media, entertainment, and telecommunication services companies. We increased our underweight in the sector during the period. Our exposure is concentrated within the interactive media and services industry through Alphabet.

• We eliminated Charter Communications in favor of other ideas with more upside potential. We felt that Charter may struggle to grow its subscriber base as competition in the space increases.