Trading activity during the quarter was driven from the bottom up. The valuation spread between growth and value continues to expand, so we have been taking a careful and disciplined approach to valuation risk-trimming or eliminating outright winners and reallocating to high-quality names at good prices, especially in cyclical areas where we have identified product- or innovation-driven cycles that should see accelerating economic returns. We want to ensure that the portfolio is balanced between stocks that have more room to run in the current environment and companies that are well-positioned for a post-coronavirus future, and we are using our imagination to envision what that might entail.

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Sector-wise, our allocations to industrials and business services and financials increased, as these are areas where we think there are high-quality, idiosyncratic opportunities that are undervalued or should benefit from economic tailwinds. On the other hand, our exposure to health care and communication services decreased as we trimmed or eliminated names that have performed well in the post-March market rally. Regionally, our exposure to Japan increased, while our allocation to developed Europe decreased.

Information Technology

We have high conviction in the technology sector, as this is an area where rapid market share shifts mean growth companies are plentiful regardless of the broader macroeconomic environment. The powerful long-run trends that we believe will drive value creation in the technology sector still remain and, in some cases, have been accelerated by the ongoing pandemic. Aftereffects from the virus outbreak could also result in lasting behavioral changes, with more people working remotely and payment methods skewing more digitally. As a result, software and electronic payments are areas of focus for our sector exposure, but we also remain positioned to benefit from increasing AI adoption as well as the growing technology consumption in emerging markets, particularly in Asia. We also have a sizable exposure to semiconductor stocks that we anticipate should benefit from content growth in automotive and industrial end markets as well as investment in data centers and artificial intelligence.

• We added to our position in Maxim Integrated Products, a high-performance analog semiconductor company focused on power management. We think Maxim is a leader in the analog power management segment with differentiated products that is well positioned to benefit from the need for leading edge power management solutions for electric vehicles, autonomous driving, and industrial automation.
• We initiated a position in StoneCo., a Brazilian merchant acquirer. This is a name we have owned in the past, as we think the firm is attacking a huge market ripe for disruption and is in a good position to gain share. With a strong management team and proven execution, the company operates a highly service-oriented model and is introducing cutting-edge technology into Brazil's payments market.
• We moved on from our position in semiconductor equipment manufacturer LAM Research. The stock has been strong since we first added the name in March, and with valuation fuller, we chose to exit our position in favor of names with greater upside potential.

Financials

Over the quarter, we moved from an underweight position to a modest overweight position, as we took advantage of severe market dislocation in the sector. Traditional developed market financials are facing a difficult environment as leading central banks have cut rates and ramped up quantitative easing measures to help counteract the negative economic impact from the coronavirus. Within the sector, we have exposure to non-traditional financials like security exchanges that have low correlation to the rest of the portfolio and provide support with volatility, online brokerages that don't have the credit risk exposure of banks, and select emerging market banks that we think are undervalued and underappreciated.

• We reinitiated a position in J.P. Morgan Chase & Co. after eliminating it in the second quarter. While we were initially worried about the firm's credit risk amid a challenging backdrop with the coronavirus pandemic and low interest rates, we now believe the risk of a credit event is low and think the firm's best-in-class business and technology structure, management team, and asset mix should serve it well on the road to economic recovery. The stock pulled back in September as investors reacted to some worse-than-expected data points, including disappointing loan growth and higher than expected expense guidance, which created an attractive entry point.
• We have a core holding in London Stock Exchange, a UK-based stock exchange and financial information company. We have high conviction in the firm, which owns a number of clearing houses, exchanges, as well as the FTSE/Russell indices. The company's strong position as an information and data provider means it is well equipped to meet the changing demands in financial markets, and the recent acquisition of Refinitiv should be transformational to the firm's business, in our view.

Industrials and Business Services

We believe that in the current lower growth world, many traditional industrials and business services companies have limited potential to accelerate and, as a result, are underweight the sector based on MSCI industrial classifications. As the coronavirus outbreak stalls economic activity, industrial companies face even greater hurdles to grow, at least in the near term. That being said, we meaningfully reduced our underweight over the quarter as we added some more cyclical names that we felt were undervalued due to a challenging backdrop from the pandemic but which we felt were well positioned for accelerating returns over the next year or two We also have more industrial exposure than our weight would imply, as we own several semiconductor and automation companies that are classified as technology, but that we view as more industrial technology.

• We started a position in global parcel and freight delivery service FedEx. We think FedEx offers a compelling cyclical opportunity due to a number of positive growth drivers that should coalesce over the near term. In particular, the coronavirus has increased demand and tightened capacity, leading to higher pricing for the industry. We also think there are company-specific tailwinds that should help drive accelerating earnings and margin improvement, including better cost synergies and prolonged capacity constraint and pricing strength in air freight, where FedEx has a dominant position.
• We eliminated our position in U.S. credit bureau Equifax. We think the firm's mortgage segment, which has done well since the pandemic began, will have tough comparables going forward and, in our view, is set to decelerate heading into 2021, so we chose to reallocate funds to names where we have higher conviction.

Health Care

Health care remains a fertile area for growth potential and accelerating technological discovery. One of our largest bets in the portfolio is in health care equipment and supplies, which are typically defensive in an election year given the uncertainty around regulation. The group also has powerful secular drivers such as the ongoing shifts to biologics and robotic surgery as tailwinds. We also have exposure to medical diagnostic and testing companies that continue to benefit from a robust coronavirus testing ecosystem that could last for longer than many expect. We have less exposure to the biopharma space due to possible regulatory change in the form of drug pricing reform, with the names we do own having relatively unique platforms.

• We eliminated our position in global eye health company Alcon. The stock performed well despite a challenging backdrop, and we felt valuation was full. Therefore, we chose to move on from our position and reallocate funds to names with greater upside potential.
• We eliminated our position in IDEXX Laboratories on strength. While we still think IDEXX is a great company with compelling growth drivers, the stock has had a significant runup, and we now think valuation is stretched and chose to reallocate to names with greater upside potential.