Ankur Crawford Call Transcript
Ankur Crawford: Well, it’s the team as well.
Speaker Question: Just a question on the themes that are driving the fourth industrial revolution. All this makes tremendous sense, e.g., the rise of FinTech. My firm came out with a paper on ESG. We think that there is going to be trillions of dollars moving into ESG. I’m curious as to how you see that yourself when you look at all the trends and the themes that are taking place. How do you factor environmental, social, governance into your stock selection? Ankur Crawford: Thanks for that question. I think it’s a really relevant one and one that Alger has been making more of an initiative on. We actually have an ESG team, a team inside of our research group that is looking at how to become more ESG compliant. We got a rating recently that acts like an ESG stamp of approval. But when we look at the fourth industrial revolution, and the beneficiaries or the tech companies that are driving it, if you look under the cover, some of them scored very highly on ESG. I’ll give you an example. One of our larger positions is salesforce.com. They’re one of the highest ranked on ESG because of the way they run their business. It’s not something that they’re targeting. It is the way they think about their business. I went to Dreamforce I think it was last year at this time. They didn’t serve any beef for lunches at Dreamforce. Why? Because they perceive that beef was environmentally damaging. They’ll make moves like that to increase diversity, increase gender diversity. If you look at Alger 25, the ESG score is quite high. We didn’t mean for it to be that way, but now, if a business has a poor ESG rating, it is something that I think about more before including it into the portfolio. We own a business called NXP Semiconductors. In the beginning of last year, their ESG score was horrendous. We met with the management team. We met the CEO and have known the CEO for years. At some point, I said, “I don’t know if I can own the stock with this kind of ESG score.”
Speaker Question: Could you talk about turnover? And then can you also talk about your sell discipline and what motivates you to liquidate a position either all or in part? Ankur Crawford: Yes. So turnover for Spectra this year, I want to say that it’s about 100 percent. But I would highlight that on the long side, it is much lower than that. Spectra has a shorting aspect to it and the turnover on the shorts is much higher than on the longs. It’s actually generating performance by having a slightly leveraged strategy. In terms of the sell discipline, there are a few reasons why we might sell a stock. The risk reward greatly changes, i.e., the stock reaches not only our one-year price target but starts to approach our three-year price target, for example. It might have baked in the growth that we are seeing over the next couple of years as well. And in that case, it doesn’t mean that the business is broken. All it means is that the market may have recognized what we had recognized. And maybe it’s recognizing it faster. That would be at minimum a trim if not a sell. Another reason might be the fundamentals just deteriorate. And our thesis is wrong. Or maybe the management hasn’t executed in a way that we had expected them to execute. I like to always say that we are humble enough to say that we can be wrong. However, there is no reason to dwell on it and sit there and lick our wound. We will happily exit if we are fundamentally wrong. I think in Alger 25, sometimes the turnover is because there are only 25 names; if you add one that seems like a compelling risk reward or compelling opportunity, you’re forced to sell another. For Alger 25, this year, it’s running at about 58 percent last I checked if you annualize it.
Conference Call 6/11
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