| ANNUALIZED SINCE INCEPTION | QUARTERLY | YTD |
|---|---|---|
| 10.93% | -11.75% | -11.75% |
TCW's concentrated growth fund declined 11.75% in Q1 2026, underperforming the Russell 1000 Growth Index's 9.78% decline amid geopolitical tensions, AI disruption fears, and market volatility. The quarter was marked by concerns over private credit markets, government shutdown, and a Citrini Research report highlighting potential AI-driven mass unemployment scenarios. Technology stocks faced particular pressure from AI disintermediation concerns, affecting holdings like ServiceNow despite solid fundamentals. However, semiconductor exposure through ASML performed well on strong EUV bookings, while Eaton benefited from accelerating datacenter demand. The managers added McKesson and Palantir while selling Tyler Technologies to reduce software exposure. They maintain conviction in their portfolio as a coiled spring, noting 2025 returns were less than half of weighted average earnings growth. With expected 20%+ earnings growth over the next two years, they apply the Stockdale Paradox - maintaining unwavering faith in long-term value realization while confronting daily market realities.
The portfolio represents a coiled spring where intrinsic value increases are not yet reflected in stock prices, with weighted average earnings growth expected to be 20%+ over the next two years using consensus estimates.
The managers maintain unwavering faith that embedded earnings growth in their portfolio will ultimately be rewarded, applying the Stockdale Paradox of confronting brutal daily reality while maintaining long-term conviction. They expect weighted average earnings growth of 20%+ over the next two years and remain optimistic about portfolio returns if earnings compound at these rates.
| Date | Letter | Tickers | Keywords | Pitches | Quick Takes |
|---|---|---|---|---|---|
| May 8 2026 | 2026 Q1 | ASML, BSX, ETN, MCK, NOW, PLTR, TYL | AI, Concentration, growth, healthcare, large cap, semiconductors, technology |
NOW BSX ASML ETN MCK PLTR |
TCW's concentrated growth fund fell 11.75% in Q1 amid AI disruption fears and geopolitical tensions. Despite technology headwinds affecting ServiceNow, semiconductor and datacenter themes performed well through ASML and Eaton. Managers view the portfolio as a coiled spring with 20%+ expected earnings growth, maintaining conviction while reducing software exposure through selective position changes. |
| Sep 30 2025 | 2025 Q3 | ADBE, ANET, ETN, GOOG, IT, NOW, NVDA, SHOP.TO, SPOT | AI, Cloud, consumer, growth, Hyperscalers, inflation, large cap, technology | - | TCW's fund underperformed in Q3 despite strong AI infrastructure thesis. Managers maintain conviction in early-stage AI growth cycle, comparing current 2.0% GDP tech spending to historical 2.9% peaks. Portfolio balances AI exposure with defensive growth stocks. Consumer spending remains bifurcated between high-end wealth beneficiaries and inflation-pressured low-end consumers. Forward catalysts include deregulation and $500B tax refunds in 2026. |
| QUARTER | THEMES | TAGS |
|---|---|---|
| 2026 Q1 |
AIAI disruption concerns dominated the quarter with fears of mass white-collar unemployment and software displacement. The managers believe numerous software companies face terminal risk but see opportunities in companies that can monetize AI paradigm shifts. |
Artificial Intelligence Software Disruption Automation Enterprise |
SemiconductorsASML performed well with strong EUV bookings and improved investor sentiment. Demand remains robust for leading-edge lithography critical to future chip production, with capacity constraints at major customers. |
Semiconductors Lithography EUV Chip Production TSMC | |
Data CentersEaton benefits from accelerating datacenter demand with orders up 200% year-over-year. The company has $3 trillion in megaprojects announced since 2021, with 54% being datacenters. |
Data Centers Infrastructure Power Equipment Cooling Megaprojects | |
HealthcareBoston Scientific faced challenges with disappointing results in key growth franchises. McKesson was added as a new position, viewed as having successfully revamped its portfolio to higher margin businesses with sustainable growth. |
Medical Devices Drug Distribution Healthcare IT Electrophysiology Pharmaceuticals | |
| 2025 Q3 |
AIAI infrastructure spending by hyperscalers continues to drive economic growth, with demand far outstripping supply. The managers believe we are still very early in the AI growth curve, comparing current tech spending (2.0% of GDP) favorably to historical peaks. AI is making companies more efficient and driving secular growth across multiple portfolio holdings. |
Hyperscalers Infrastructure GPUs Data Centers Efficiency |
CloudCloud service providers are funding AI growth with current cash flow, unlike the dot-com era when companies were free cash flow negative. The managers highlight strong fundamentals across cloud platforms, with Alphabet processing over 980 trillion tokens monthly and significant user growth across AI services. |
Service Providers Cash Flow Tokens User Growth Platforms | |
E-commerceShopify demonstrated strong performance with 31% YoY revenue and GMV growth, expanding internationally with 42% YoY international GMV growth and 49% growth in Europe. The platform is successfully moving beyond small brands to attract larger enterprises, showing the durability of its growth profile. |
GMV International Enterprise Platforms Growth | |
InflationThe managers discuss bifurcated consumer impact from inflation, with the 'Common Man CPI' still outpacing headline CPI and wages. Base effects are real, particularly impacting lower-end consumers disproportionately, while high-end consumers benefit from positive wealth effects from stock market highs. |
Consumer Wages Wealth Effects Bifurcation Base Effects |
| Date | Pitch Type | Author | Ticker | Company | Industry | Sub Industry | Bull / Bear | Exchange | Keywords | Action |
|---|---|---|---|---|---|---|---|---|---|---|
| May 8, 2026 | Fund Letters | TCW Concentrated Large Cap Growth Fund | ETN | Eaton Corporation plc | Specialty Industrial Machinery | Electrical Components & Equipment | Bull | New York Stock Exchange | Cooling Systems, datacenters, electrical equipment, Industrial Equipment, infrastructure, Megaprojects, Power management | Login |
| May 8, 2026 | Fund Letters | TCW Concentrated Large Cap Growth Fund | MCK | McKesson Corporation | Medical Distribution | Health Care Distributors | Bull | New York Stock Exchange | capital allocation, Drug Distribution, Healthcare Distribution, Healthcare IT, network effects, oligopoly, pharmaceuticals | Login |
| May 8, 2026 | Fund Letters | TCW Concentrated Large Cap Growth Fund | PLTR | Palantir Technologies Inc. | Software - Infrastructure | Application Software | Bull | New York Stock Exchange | AI platform, analytics, Data-integration, Defense, Enterprise software, Government, Ontology, workflow automation | Login |
| May 8, 2026 | Fund Letters | TCW Concentrated Large Cap Growth Fund | NOW | ServiceNow, Inc. | Software - Application | Application Software | Bull | New York Stock Exchange | AI, Cloud computing, Digital transformation, Enterprise software, SaaS, subscription model, workflow automation | Login |
| May 8, 2026 | Fund Letters | TCW Concentrated Large Cap Growth Fund | BSX | Boston Scientific Corporation | Medical Devices | Health Care Equipment | Bull | New York Stock Exchange | cardiovascular, Clinical trials, Electrophysiology, Healthcare Equipment, Interventional Medicine, Medical devices, Watchman | Login |
| May 8, 2026 | Fund Letters | TCW Concentrated Large Cap Growth Fund | ASML | ASML Holding N.V. | Semiconductor Equipment & Materials | Semiconductor Equipment | Bull | NASDAQ | Chip Manufacturing, Euv, Foundry, Lithography, Memory, Netherlands, semiconductor equipment, TSMC | Login |
| TICKER | COMMENTARY |
|---|---|
| NOW | Shares of ServiceNow, Inc. (NOW; 2.60%) moved lower despite reporting solid quarterly results in late January. Operating margin (33.5%) and EPS (+30% YoY) topped consensus estimates, and cRPO (current Remaining Performance Obligations) grew 20.5% (vs. guidance of +18%). Management's sequential forward guidance for cRPO was only in-line with consensus estimates, however, and provided ammunition for bears to posit NOW's three recent acquisitions (Armis, Moveworks and Veza) were a signal that organic growth may be slowing. While we believe the organic growth outlook remains healthy and that all three acquisitions are good strategic fits that help expand NOW's TAM (Total Addressable Market) and differentiation, the rise of agentic AI led to an abrupt market sell-off in many SaaS (Software-as-a-Service) stocks, including NOW. The market's current view is that well-funded AI labs such as Anthropic and OpenAI will allow enterprises to bypass specialized software, thus reducing the need for NOW's offerings. Though we recognize the industry is shifting away from seat-based to consumption-oriented pricing structures, we believe the complexity and switching costs for an enterprise migration is misunderstood by the market. Our view remains that NOW is strongly positioned to capitalize on AI monetization given its role as the system of engagement across enterprise workflows. While still somewhat early, NOW's monetization of AI offerings is impressive (closed 12 Now Assist deals over $1 million in ACV during the quarter, Agent Assist consumption grew 55x since the launch in May 2025, and $600 million ACV for Now Assist). We remain constructive on shares. |
| BSX | Shares of Boston Scientific Corporation (BSX; 2.05%) moved lower during March after the company reported disappointing quarterly results in early February, and the company presented data from the highly anticipated CHAMPION-AF trial at the end of March. Though BSX modestly beat top and bottom-line consensus estimates, the company's two key growth franchises (U.S. Electrophysiology and Watchman) missed expectations. Management lowered 2026 organic sales growth guidance to a range of +10-11%. BSX continues to garner the majority of sales in electrophysiology, but overall market growth is decelerating, and competition may be taking some market share. While Watchman growth was strong (+29% organically in the quarter), results missed consensus estimates. The durability and growth trajectory for Watchman is a focus for investors, and although CHAMPION-AF data released at the end of the month hit all endpoints, they failed to act as a positive catalyst for BSX shares. Though we recognize the timing and magnitude of WATCHMAN contribution may not be resolved in the near-term, we believe current valuation may have overly discounted the company's long-term earnings growth profile. As we closely monitor the situation, we remain constructive on shares. |
| ASML | Shares of ASML Holding N.V. (ASML; 3.46%) rallied after the company reported solid 4Q25 results. Revenue of €9.7b (+29% QoQ, +5% YoY) modestly beat consensus estimates of €9.6b as strength in services (upgrades) and foundry offset slower memory shipments. Bookings of €13b meaningfully topped consensus estimates (€7.5b) driven by leading edge EUV (Extreme Ultraviolet) bookings of €7.4b. Management's CY26 revenue guidance range was wide (+4% to +19%), reflecting the potential timing of deliveries (2026 or 2027), but it is much better than a quarter ago when management said 'we do not expect 2026 total net sales to be below 2025.' Investor sentiment has improved meaningfully over the last quarter due to strong capex guidance by TSMC, increasing DRAM pricing, and acknowledgement capacity constraints exist at ASML's largest customers. In our view, demand remains robust for ASML as the lone provider of leading-edge lithography, critical to future chip production. We remain positive on shares. |
| ETN | Shares of Eaton Corporation plc (ETN; 2.59%) moved higher after reporting quarterly results that were largely in-line with consensus estimates. Management's sequential guidance of +5% to +7% organic top-line growth missed consensus (+7.6%). Demand remains strong (orders +50% YoY and datacenter orders +200% YoY). Increased costs are weighing on near-term margins, however, as the company ramps to meet accelerating demand. The backlog of projects is impressive: $3 trillion of megaprojects announced since 2021 ($937 billion announced in 2025) and 54% of the new projects are datacenters. The company's Boyd acquisition (expected to close in the second quarter) bolsters ETN's datacenter cooling capabilities and expands ETN's accessible market from $2.9 million/megawatt to $3.4 million/megawatt. We remain positive on shares. |
| MCK | McKesson Corporation (MCK; Healthcare; 1.19%) – McKesson provides drug distribution and IT services to healthcare providers and pharmaceutical manufacturers in North America (U.S. and Canada). The company distributes branded and generic pharmaceuticals, medical-surgical supplies, and related services to healthcare providers, independent and retail chain pharmacies, and mail order facilities. The company's Prescription Technology Solutions (PTS) segment provides third party logistics, affordability, and access solutions to biopharma, retail pharmacy, and healthcare providers. We believe the company has successfully revamped its portfolio over the past decade to higher margin and faster growth businesses, which we believe will lead to a more sustainable and higher growth algorithm than peers. We are attracted to the company's competitive position in an oligopolistic market, network effects in its PTS segment, and management's history of strong capital allocation. We believe the current share price does not adequately reflect the longer-term cash flow generation potential of the business. |
| PLTR | Palantir Technologies Inc. (PLTR; Information Technology; 0.71%) - Founded in 2003, Palantir is an enterprise software and AI platform company that builds systems that enable large organizations (governments, defense agencies, and enterprises) to integrate, analyze, and act on complex data through custom applications and workflows. Organizations are overwhelmed by vast amounts of data trapped in siloed, disparate systems, but they lack the connective tissue to operationalize that data into decisions and automated workflows. Palantir's software creates connective tissue by layering a proprietary Ontology (a structured, real-time data model that maps objects, relationships, and business logic) on top of enterprise data sources, which then powers applications, agents, and other AI-powered use cases. Ontologies can be a heavy upfront lift, but they become a source of competitive advantage to the customer, enable accelerated time to value in an organization, and create stickiness with Palantir's products. We believe Palantir's competitive advantages include its technology, go-to-market motion, and high switching costs once the company is embedded in an enterprise. We believe the current share price does not reflect the long-term earnings power of the company. |
| TYL | Tyler Technologies, Inc. (TYL; Information Technology) -- Tyler Technologies provides mission-critical, vertical software solutions for the public sector, primarily state and local governments. When we first purchased shares, we were attracted to the fact that governments have lagged commercial industry in tech modernization and we believed Tyler would be a key beneficiary of the accelerating migrations of local and state governments to more modern, SaaS (Software-as-a-Service) and Cloud-based solutions. Given the company's focus on vertical market software for state and local governments and schools, we believed the company enjoyed a sticky customer base with low churn and more limited economic sensitivity. Growth has been below our initial expectations, the government spending backdrop has been pressured, and AI disintermediation concerns have created added difficulties for all software companies. As part of effort to reduce our application software exposure, we concluded our conviction in Tyler's business model advantage and market potential were below other names in the portfolio. We therefore elected to sell our shares. |
| Ticker | Put/Call | Amount Bought | Shares Bought | % Change | Weight % |
|---|---|---|---|---|---|
| No Recent Buys Data | |||||
| Ticker | Put/Call | Amount Sold | Shares Sold | % Change | Weight % | Status |
|---|---|---|---|---|---|---|
| No Recent Sells Data | ||||||
| Industry | Prev Quarter % | Current Quarter % | Change |
|---|---|---|---|
| No industry data available | |||
