Get 40% Off
🤯 This Tech Portfolio is up 29% YTD! Join Now to Get April’s Top PicksGet The Picks – Just 99 USD

Best U.S. fund managers of '18 buying healthcare, pot stocks as market wobbles

Published 2019-01-15, 02:43 p/m
Updated 2019-01-15, 02:50 p/m
© Reuters.  Best U.S. fund managers of '18 buying healthcare, pot stocks as market wobbles

© Reuters. Best U.S. fund managers of '18 buying healthcare, pot stocks as market wobbles

By David Randall

NEW YORK, Jan 15 (Reuters) - The top-performing U.S. growth fund managers of the last year are taking the recent slide in the U.S. stock market to add to their bets in companies they expect will continue to expand regardless of the direction of the overall economy.

Among their top bets: life science companies like Biogen Inc BIIB.O, laboratory supply company Thermo Fisher Scientific Inc (NYSE:TMO) TMO.N , and Canadian cannabis company Tilray Inc TLRY.O .

The bullishness comes at a time when U.S. stock investors must weigh a strong domestic economy against the threats to growth posed by rising interest rates and a global economic slowdown exacerbated by higher trade tariffs between the United States and China, the world's largest economies.

The S&P 500 tumbled in the fourth quarter, edging close to the 20 percent decline from its high that would signify a bear market. Since hitting a low on Christmas Eve, the broad market is up nearly 11 percent.

"In a nutshell, we think very little has changed," said Tom Slater, a portfolio manager of the $11.2 million Baillie Gifford U.S. Equity Growth fund, which has beaten the benchmark S&P 500 by 13.3 percentage points over the last 12 months. "There's a lot of doom and gloom in financial markets but we see fairly little evidence that doom and gloom is merited."

As a result, Slater is sticking with companies like food delivery service GrubHub Inc GRUB.N and e-commerce platform company Shopify Inc SHOP.TO that are innovating new business models or opening up old industries through innovation.

"We're not massively interested in investing in technology but in new business models," Slater said.

Anthony Zackery, a portfolio manager of the $127.6 million Virtus Zevenbergen Innovative Growth fund, said that his fund is eschewing some of the larger tech giants like Apple Inc AAPL.O that have led the broad market higher over the last few years and instead has been adding to its stake in tech companies such as identity management software company Okta Inc OKTA.O . Shares of the company are already up 12.7 percent since the start of January, adding to an approximately 160 percent rally over the last 12 months.

"We believe that the stock could double over the next three to four years if they continue executing," Zackery said.

Along with Okta, Zackery is also bullish on Canadian cannabis company Tilray Inc, whose shares he bought during its initial public offering, because of its business lines focused on both the recreational and medical marijuana market.

"We believe that we are in the early innings of the end of global prohibition (of marijuana)," he said.

Christopher Smith, portfolio manager of the $249 million Artisan Thematic Investor fund, said that he is focusing on life science companies because their products are not subject to tariffs at a time of increasing spending on healthcare in emerging markets like China.

"It's somewhat immune to the uncertainty," he said.

He has been adding to his position in companies such as Thermo Fisher, Danaher Corp (NYSE:DHR) DHR.N , and PerkinElmer Inc (NYSE:PKI) PKI.N because they operate in segments with high barriers to entry and have the ability to raise prices. At the same time, he is avoiding all of the so-called FANG stocks - a moniker given to the group of Facebook (NASDAQ:FB), Amazon.com (NASDAQ:AMZN), Netflix (NASDAQ:NFLX), and Google-parent Alphabet (NASDAQ:GOOGL) - that led the market early last year.

"They just became over-owned and they're resetting now," he said. Instead, he is focusing on companies that "have the ability to monetize data" such as IHS Markit Ltd INFO.O , Fidelity National Information Services Inc FIS.N , and Intercontinental Exchange Inc ICE (NYSE:ICE).N , he said.

Michael Lippert, portfolio manager of the $372.3 million Baron Opportunity fund, said that the recent rally in the S&P 500 can be pinned on the fact that "the market got the call wrong on the Fed," and recalibrated after Fed Chairman Jerome Powell's comments that the central bank could be "patient" dialed back market expectations for rate hikes this year.

The deep declines in December allowed him to add companies to his portfolio such as life sciences software company Veeva Systems Inc VEEV.N that had long been on his watch list, he said. He began buying shares in the company when it traded around $84 a share in late December. It now trades at slightly over $100 a share, giving him a 19 percent gain in slightly more than two weeks.

"I wish I hadn't been cute and bought more," he said.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.