Hot Mutual Fund Loves Facebook, Amazon, Apple, Netflix, Google

Portfolio Managers Patrick Kelly, CFA, and Dr. Ankur Crawford discuss the Alger Focus Equity Fund with Investor's Business Daily.

VOL. 37, NO. 34

W W W . I N V E S T O R S . C O M




Hot Mutual Fund Loves Facebook, Amazon, Apple, Netflix, Google

Amazon alone. That’s its largest position. Amazon’s 69% gain so far this year helps make this one of the best mutual funds. “Amazon is by far the leader in two massive secular trends: e-commerce and cloud computing,” Kelly said. “We believe Amazon will replace Walmart WMT as the largest retailer in the U.S. by 2023. It’s also developing a massive, high-margin digital advertising business, which can grow to almost $40 billion in 2022 from $5 billion in 2017. And in Amazon Web Services AWS , they invented the cloud computing business.” Kelly added, “AWS has a $46 billion run rate, growing about 30% annually, with EBIT (earn- ings before interest and taxes) margins over 30%.” Run rate is annualization of Amazon’s Sep- tember quarterly revenue. Kelly said, “Amazon also con- tinues to invest in new business areas like groceries, one-day shipping, business-to-business commerce and geographic ex- pansion in India and South America. And they are investing heavily in logistics.” Qualcomm QCOM , up 68% this year, is another big reason this portfolio is one of the best mu- tual funds. Strategically, the fund manag- ers see the chipmaker as a pure play on the transition to 5G mo- bile communications. Qualcomm is a linchpin to a world in which most everything is connected — the Internet of

The $1.2 billion Alger Focus Equity Fund ALGRX is one of the best mutual funds. And it is not hard to see what’s at the heart of fund managers Patrick Kelly and Dr. Ankur Crawford’s in- vestment strategy. Their portfolio is, as its name indicates, focused, with only 48 stocks as of Sept. 29. Their top 10 holdings account for 53% of their shareholders’ money. And they hold all five of the super-popular megacap FAANG technology stocks: Facebook FB , Apple AAPL , Amazon AMZN , Netf- lix NFLX and Google-parent Al- phabet GOOG . All but Netflix are in their top 10. Why bet big on big winners? “The concept of innovation and change is at the core of our investment philosophy,” said Crawford, whose Ph.D. in ma- terials science and engineering aids her search for buys in fields such as chipmaking. “Twenty years ago, innovation was com- ing from a lot of small- and mid- cap companies. In the world to- day, a lot of innovation is coming from the large-cap platforms. Those are the businesses that have the capital and scale to re- ally afford to do this.” The fund has a 10% bet on Focus On Top Portfolio Ideas Fund loves FAANG stocks because it aims for firms that grow by innovating BY PAUL KATZEFF INVESTOR’S BUSINESS DAILY

Alger Focus Equity I

Sector weightings

Fund as of 8/31/20, S&P 500 as of 10/31/20

35.58% % of stock assets

% of S&P 500


Basic materials Consumer cyclical Financial services

2.67 2.26% 19.10 11.34 12.00 12.82

Real estate



Economically sensitive 53.50 Communication services12.66 11.15 Energy 0.00 2.01 Industrials 3.16 8.75 Technology 37.68 24.20 Defensive 10.92 Consumer defensive 0.84 7.49 Health care 10.08 14.15 Utilities 0.00 3.20

Ankur Crawford Patrick Kelly


None 0.89% ALGRX

Expenses: Symbol:

2019: 33.92% 3-yr. avg.: 24.02% YTD:40.93% 5-yr. avg.: 20.69% 10-yr. avg.: 16.98% Total returns as of 11/24/20

Total returns as of 11/24/20

30 40 50%

Alger Focus Equity I Large-cap growth funds S&P 500

0 10 20

1 year

15-yr avg

Source: Morningstar Direct

a judge said the company had overcharged mobile phone mak- ers for its wireless chip patents. Qualcomm’s near exclusive status as a maker of two kinds of chips lets it levy high royalty rates. Most of Qualcomm’s prof- it comes from royalties handset makers pay to use the firm’s cel- lular patents. “The stock never expressed its full potential until this overhang was removed,” Crawford said. “Over the next two to three years, Qualcomm’s growth will accelerate as they gain share as a large customer,

Everything, an extension of the Internet of Things (IoT), Craw- ford says. “Over time, everything will be connected,” she added. “And the catalyst for that is 5G.” 5G is shorthand for the latest, fastest wireless communica- tions networks. Also, investors like Crawford and Kelly are relieved that a long-standing regulatory cloud shadowing Qualcomm has been lifted. InAugust a federal appeals court reversed a federal antitrust ruling against the company. In the earlier district court case,



Apple, grows in the 5G space. And they will take a majority share in chipsets in 5G hand- sets.” If that growth does occur, it could make Qualcomm a bigger contributor to Focus Equity’s bid to remain among the best mutual funds. Still, the Federal Trade Com- mission could appeal. Why does one of the best mutual funds like PayPal PYPL ? The company is a driver of and beneficiary of the shift to digi-

tal payments. That shift gets a tailwind from the growth of e-commerce, Crawford says. It also gets a boost from the coro- navirus pandemic. PayPal also should benefit from the increasing popularity of Venmo, its peer-to-peer pay- ments platform. And PayPal is partnering with other growing businesses, including Mercado- Libre MELI and Facebook. Argentina-based MercadoLi- bre is an online retailer, auction site and payments facilitator. In

Mutual Funds Award winner, having topped the S&P 500 in calendar 2019 as well as over the three, five and 10 years ended Dec. 31 on an average-annual- return basis. Year to date going into Wednesday, the fund was on pace to repeat as an IBD Best Mutual Funds Award win- ner with a return of 40.93% vs. the S&P 500’s 14.42%. The fund’s large-cap growth rivals tracked by Morningstar Direct averaged 28.98%.

addition, PayPal has become a lead generation service for con- sumers seeking financial servic- es such as loans and insurance, Crawford says. And PayPal has launched a cryptocurrencies trading service. In turn, each new service pro- vides PayPal with information about customers, which it can then seek to monetize, Craw- ford says. In what way is Focus Equity one of the best mutual funds? The fund is a 2020 IBD Best

Posted with permission from Investor’s Business Daily, Inc. Copyright © 2020 All rights reserved. C111095 Managed by The YGS Group, 800.290.5460. For more information visit

This article reprint, originally published by Investor’s Business Daily on November 27, 2020, is considered sales literature for the Alger funds mentioned only and not for any other products shown. Please note that Investor’s Business Daily is an independent publication and the performance and ratings cited in the article do not represent the experience of any individual investor. For the period ending September 30, 2020, the Alger Focus Equity Fund (the “Fund”) returned the following:

Average Annual Total Returns (%) (as of 9/30/20) Ticker

1 Year

3 Years

5 Years

10 Years

Since Inception

Class I (Incepted 11/8/93)







Class Z (Incepted 12/31/12)






( Since 12/31/2012) 18.45 (Since 11/08/1993) 10.49

Russell 1000 Growth Index





TotalAnnual Operating Expenses by Class (Prospectus Dated 3/1/20)

Without Waiver: I: 0.96% Z: 0.66% With Waiver: 0.89% 0.66%

Fred Alger Management, LLC has contractually agreed to waive fees or to reimburse Fund expenses (excluding acquired fund fees and expenses, dividend expense on short sales, borrowing costs, interest, taxes, brokerage and extraordinary expenses) through February 28, 2021 (Class Z) to the extent necessary to limit the annual operating ex- penses of Class I to 0.89% and Class Z to 0.66% of the class’ average daily net assets. This expense reimbursement may only be amended or terminated prior to its expiration date by agreement between Fred Alger Management, LLC and the Fund’s Board of Trustees, and will terminate automatically in the event of termination of the Investment Advisory Agreement. Only periods greater than 12 months are annualized. Prior to December 31, 2012, the Fund followed a different investment strategy under the name “Alger Large Cap Growth Institutional Fund” and was managed by different portfolio managers. Prior to October 15, 2018, the Fund followed its current investment strategy, with the same portfolio managers, under the name “Alger Capital Appreciation Focus Fund.” The performance data quoted represents past performance, which is not an indication or a guarantee of future results. Investment return and principal value of an investment will fluctuate so that an investor’s shares, when redeemed, may be worth more or less than their original cost. Current performance may be lower or higher than the performance quoted. Performance figures assume all distributions are reinvested. For performance current to the most recent month end, visit or call 800.992.3863. The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of December 2020. These views are subject to change at any time and may not represent the views of all portfolio management teams. These views should not be interpreted as a guarantee of the future performance of the markets, any security or any funds managed by FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities. Holdings and sector allocations are subject to change . Risk Disclosures: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings andmay be more sensitive to market, political, and economic developments. A significant portion of assets will be invested in technology and healthcare companies, which may be significantly affected by competition, innovation, regulation, and product obsolescence, and may be more volatile than the securities of other companies. Investing in companies of small and medium capitalizations involve the risk that such issuers may have limited product lines or financial resources, lack management depth, or have limited liquidity. Assets may be focused in a small number of holdings, making them susceptible to risks associated with a single economic, political or regulatory event than a more diversified portfolio. Foreign securities and Emerging Markets involve special risks including currency fluctuations, inefficient trading, political and economic instability, and increased volatility. Class I shares are an investment vehicle for institutional investors, such as corporations, foundations, and trusts managing various types of employee benefit plans, as well as charitable, religious, and educational institutions. Investors may purchase or redeem Class I shares through a financial intermediary. There are no sales charges on purchases or redemptions. The Russell 1000® Growth Index measures the performance of the large-cap growth segment of the U.S. equity universe. It includes those Russell 1000 companies with higher growth earning potential as defined by Russell’s leading style methodology. The Russell 1000 Growth Index is constructed to provide a comprehensive and unbiased barometer for the large-cap growth segment. Russell 1000® Growth Index performance does not reflect deductions for fees or expenses. Investors cannot invest directly in any index. Index performance does not reflect deductions for taxes. Note that comparing the performance to a different index might have materially different results than those shown. The performance data quoted represents past performance, which is not an indication or a guarantee of future results. Frank Russell Company (“Russell”) is the source and owner of the trademarks, service marks and copyrights related to the Russell Indexes. Russell® is a trademark of Frank Russell Company. Neither Russell nor its licensors accept any liability for any errors or omissions in the Russell Indexes and / or Russell ratings or underlying data and no party may rely on any Russell Indexes and / or Russell ratings and / or underlying data contained in this communication. No further distribution of Russell Data is permitted without Russell’s express written consent. Russell does not promote, sponsor or endorse the content of this communication. The following positions represented the noted percentages of assets in the Alger Focus Equity Fund Portfolio as of 9/30/20:, Inc., 9.72%; Apple Inc., 6.89%; Facebook, Inc. Class A, 4.13%; PayPal Holdings Inc., 3.84%; Qualcomm Inc., 1.53%; Netflix, Inc., 0.59%; Alphabet Inc. Class C, 2.62%; MercadoLibre, Inc., 1.01%; Walmart Inc., 0.00%. Before investing, carefully consider the Fund’s investment objective, risks, charges, and expenses. For a prospectus and sum- mary prospectus containing this and other information or for the Fund’s most recent month-end performance data, visit www., call (800) 992-3863 or consult your financial advisor. Read the prospectus and summary prospectus carefully before investing. Distributor: Fred Alger & Company, LLC. Member NYSE Euronext, SIPC. NOT FDIC INSURED. NOT BANK GUARANTEED. MAY LOSE VALUE.

Fred Alger & Company, LLC 360 Park Avenue South, New York, NY 10010 / 800.992.3863 /


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