Ankur Crawford Call Transcript
Ankur Crawford (continued): For an auto insurance company, this is what can happen when you’re embracing this digitization. Another example is a company called CoStar Group. This is digitizing commercial real estate and all the data surrounding it: transactions, data, advertising. This is the largest and most comprehensive digitized data source for commercial real estate and now for rental apartments. They basically consolidate the industry and are effectively an oligopoly and have pricing power. For someone renting an apartment, they’d go to apartments.com. That’s one arm of their business. But they have like 80 percent share of that online market. The power of this platform allowed them to grow 16 percent during the worst of the lockdowns. One would think, who is looking for real estate right now? Who is actually paying for any of these fee services? But when people do need to move, they’re reaching for these kinds of technologies. The point of the above examples was just to show you how digitization is standing across so many different industries. The way we choose where to invest is we look for those businesses that are adapting to and embracing the new world. Dennis Hearns: Ankur, you became a portfolio manager on the Spectra strategy in 2015 and you’ve been a PM on the Alger 25 strategy since its launch at the beginning of 2018. While most folks on the call are familiar with the Spectra strategy and its long history, I don’t believe many on the call are familiar with the Alger 25 strategy. Ankur Crawford: Yes. Philosophically, I think it is a sibling to the rest of our strategies. It is not philosophically different in what we look for in businesses. However, it is different in that it is completely sector agnostic. I’ve never looked at the weightings of the main holding in a portfolio relative to the S&P on a sector basis. Can you tell us about your approach to that strategy?
All I’m looking for is 25 of the best businesses in the market. I invest in businesses that adhere to the characteristics of having compounding growth with duration. They have great management teams since the management teams are truly the stewards of the capital that we trust them with. Businesses that have pricing power, businesses that have strong business models, which allow them to have things like pricing power and therefore margin expansion and free cash flow growth. There’s always room in the portfolio for businesses that are more opportunistic in nature so where the risk reward is highly compelling and where they have aspects of the other characteristics. But maybe it’s a fallen angel or the opportunity in the market is so big that they’re taking a tiny share today. So, the opportunity is just big. We’d call that more opportunistic. It’s an exciting and kind of fun strategy to run because the large weightings in almost every position make each one highly impactful to the portfolio. Sometimes people ask me how is running this portfolio different versus a more diversified portfolio. I think sometimes the hardest part here is deciding which of the names should hold a position in the portfolio because there’re so many different businesses that have unique characteristics and that are great businesses. Sometimes that ends up being the most difficult portion of running Alger 25 because you want it to be balanced. I’ve tried for it to be balanced in terms of risk reward, in terms of the risk I know of across end markets. It has been an interesting journey on this 25-stock highly focused portfolio. And I am excited to bring it to market. Their turnover tends to run a little bit lower. The sector rates can vary greatly because again all we’re looking for is great businesses regardless of a sector.
Dennis Hearns: The results have been really impressive. Congratulations on that.
Conference Call 5/11
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