Alger Morningstar Medalists
Reprinted by permission of Morningstar, Dec. 18, 2020
Alger Spectra Z ASPZX A winning team and approach.
Morningstar's Take ASPZX
emerging firms with strong business models, increasing product demand, and growing market share. Others are established businesses undergoing changes that could spur growth, such as new management or product advancements. The managers can allocate up to 10% of the portfolio to short stocks, typically firms they believe are likely to lose market share to competitors, especially those owned in portfolio as long positions. Kelly and Crawford aren’t afraid to go against the grain; as of August 2020, the portfolio’s largest active weightings were in firms such as Alibaba BABA, while the duo was underweight three of the five so-called FAANG names. This approach has stood the test of time. From Kelly’s September 2004 start through October 2020, the A shares’ 14.8% annualized gain topped the Russell 3000 Growth Index’s 11.5% and placed in the top decile of large-growth Morningstar Category peers. The strategy has fared well so far through 2020’s market volatility. From the start of the year through October, the A shares rose 25.9% versus the benchmark’s 19.1% and the typical peer’s 16.6%. Strong healthcare and consumer discretionary picks drove the recent outperformance.
management or product advancements. The strategy is able to short up to 10% of assets. The managers typically short stocks they believe are likely to lose market share to competitors, especially those owned in portfolio as long positions. They believe satellite radio firm Sirius XM Holdings SIRI, for example, is operating legacy technology and facing competition from streaming services such as Apple’s AAPL Apple Music Radio. The duo turns to its analyst team for deeper research. The analysts generate one-, three-, and five-year target prices for each company, modeling earnings and cash flows out five years. Kelly and Crawford pick stocks they believe have the most upside potential relative to their price targets. They monitor risk/reward trade-offs and often trim positions once they come within 10% of their price targets, a discipline which contributes to the portfolio's above-average portfolio turnover versus the typical large-growth category peer. Managers Patrick Kelly and Ankur Crawford manage a top-heavy strategy. As of August 2020, the approximately 130-stock portfolio’s 10 largest weightings consumed 51% of assets versus the Russell 3000 Growth Index’s 44%. Overweightings to Alibaba and Visa V drove much of the large top-10 allocation. However, the portfolio’s weightings to index titans Facebook FB, Amazon AMZN, Apple , Netflix NFLX, and Alphabet GOOG (or the FAANG stocks) in August was 24.1% versus the benchmark’s 27.3%. The managers have increased the portfolio’s short positions to 6.6% of assets in August from just 1.7% in November 2018. The portfolio has lost some of its distinctive flair. The strategy’s active share (a measure of how differentiated a portfolio is from an index) has decreased as its name count has dropped in recent years. In July 2014, the 189-stock portfolio’s active share was 71% versus the Russell 1000 Growth category index; active share and name count were down to just 52% and 129, respectively, as of
Morningstar Analyst Rating
Morningstar Pillars Process
Role In Portfolio Core Fund Performance Year
Total Return (%)
YTD 2019 2018 2017 2016
39.11 32.61 -0.57 31.47
8.92 0.71 1.52 3.80 -3.06
Data through 11-30-20
11-20-20 | by Tony Thomas, Claire Butz
Alger Spectra’s experienced team employs a time- tested aggressive-growth approach. All share classes earn a Morningstar Analyst Rating of Bronze except the pricier C shares, which warrant Neutral. Managers Patrick Kelly and Ankur Crawford are proven leaders. Kelly is an industry and firm veteran; he has managed this strategy with competitive results since September 2004. Crawford joined the strategy in June 2015 after rising through the analyst ranks at Alger. Her technology sector expertise is an asset for this tech-heavy portfolio. The managers continue to add to their experienced lineup of five dedicated analysts, hiring two in 2020.
Associate analyst Claire Butz contributed to this report.
Above Average | Tony Thomas,
Claire Butz 11/20/2020 Managers Patrick Kelly and Ankur Crawford's skilled use of Alger's firmwide growth approach to investing merits an Above Average Process rating. Kelly and Crawford look for companies that are poised for growth in one of two stages. Some are emerging firms with strong business models, increasing product demand, and growing market share. Others are established businesses undergoing beneficial changes such as new
The managers have skillfully picked winning growth firms. The team looks for companies poised for growth in one of two stages. Some are
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