Amy Zhang Call Transcript


Amy Zhang (continued): So also, I think given my credit background I care a lot about financial quality. So, it’s good that I didn’t have to make many changes. I looked at our portfolio, I saw that it was recession resilient – I mean, we went through a mini recession. We just didn’t know it was going to be caused by COVID. But I think we’ve been preparing for a recession for a long time, and I always want our companies to be recession resilient. High-financial quality is so important, so I felt good about that when examining the portfolio. Then I started to analyze “what if this got worse?” I would definitely need cash because the market is forward-looking, and you saw what happened in the rest of the world with COVID. It was terrible. I’ve been a health care investor for so many years, and I could see COVID was going to be more of a public health care crisis than most people thought, because most people were more optimistic back then. So, I think the dry powder, or cash, was already between 5% and 10%. For mid cap, we have more cash coming in so it’s around 10 – at times it was 10-plus. So, it was deliberate because I knew there would be opportunities and then we were able to buy more on weakness. Like Datadog, for example. I watched the company’s IPO. Its stock went up a lot and then it went down. Shake Shack was another example. Shake Shack did a secondary offering. I thought that was very interesting. So that was also in April. So, a lot of things happened like that in terms of taking advantage of market volatility and you’ve got to have cash to do that. That is when technical considerations are important. But stock selection is important, just over the long term, because if the portfolio was not a high-quality portfolio, we still wouldn’t be able to weather the storm that well. The key, especially in Small Cap Focus, is that it is really important to select the right companies because it’s really about having those companies that can go up to, say, four or five times but in a times of crisis also go

down a lot less than other companies.

But I’m proud to say, other than overall performance, I think the thing that I care most about and I’m most proud of is our upside and downside capture. Our upside is about 120 and downside is about 69 for Small Cap Focus. And Mid Cap Focus is similar, about the same for one year. I think that speaks to our process. Matt Goldberg: Amy, it is interesting how your experience at Citicorp gave you some perspective on the importance of a downside and thanks for sharing how that’s always on your radar. Speaker Question: Palantir and Snowflake are both going public. They are both very large companies. It appears to me the valuations are very high. Can you comment? And then can you comment on BigCommerce potentially being the next Shopify? Amy Zhang: We’re looking at both IPOs. Snowflake could potentially be interesting, but it’s priced to perfection at this point, and we don’t chase IPOs, with the exception of Avalara. That was one exception because I knew Avalara at that time was very reasonably priced. But those are very important companies. We invest in data and in the cloud. It’s very important for us to have a holistic approach. So, we listen to their presentations and it’s on our radar. We looked at BigCommerce and we thought the jury was still out. It’s very different from Shopify. Shopify has marquee customers, even from its beginning, and it has direct exposure to revenues based on gross merchandise volume, so the potential growth trajectory of BigCommerce is different. In terms of Shopify, it’s been phenomenal and I have invested in Shopify since late 2016. But BigCommerce is on our radar. It’s a very interesting company. We follow it very diligently, even just for better understanding Shopify. Do they have potential? Maybe. I know they signed Instagram, which is great, but the business model is not the same as Shopify. So that’s why you don’t see explosive growth.

Conference Call 7/9

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