Large Cap Investing During Volatile Markets

TRANSCRIPT

Ankur Crawford : We did actually take the shorting position, to about 7.5%–8%. As the market has gone down, the shorting opportunities have become fewer and it currently rests about at about 4.8% because the risk reward, even on the shorts, as the market has collapsed has changed dramatically. We tried to do a bit more shorting on the cyclical side in the beginning of this sell off. We have since kind of moderated that position and are looking at this point for opportunistic shorts of companies that have not yet been hurt by this because we think on a bounce back they will underperform. Speaker Question : Good morning. For the Capital Appreciation strategy, I'm wondering what the current cash position is and also if inflows are helping to increase the cash and it does present you the opportunity then to take that and add to either existing positions and new positions? And just also curious if you're more evaluating right now or if you're starting to add to holdings because of the cash you have? Patrick Kelly : We have not been running a big cash position. Right now the cash position is around 1.5%, I believe. As I mentioned earlier, the volatility in the market is creating opportunities on the buy and the sell side and we're continuing to evaluate those opportunities and trying to stay sharp on the risk rewards in our names and the buy points. There was a large industrial stock that sold off dramatically last week and we added to that and it's up over 25% in a week. It was just one of those days where there was a lot of indiscriminate selling. There's another company, a technology company that sold off very sharply and we added to that stock and the stock's up about 15% in a week. I think this market and its volatility presents opportunities to trim names on strength and there's opportunities to buy some names on weakness and we're trying to take advantage of this volatility to actively manage the portfolio.

extra cash that you're taking advantage of the opportunities like the two of you just mentioned?

Patrick Kelly : The flows aren't really impacting our ability to take advantage of opportunities.

Speaker Question : Has turnover increased and, as part of that, have you repositioned the portfolio into any one industry or sector more so, given what you may see on the other side of this as we come past this virus? Patrick Kelly : I would say turnover has picked up again amidst this volatility and we are actively managing the portfolios, so that has resulted in increased turnover within the portfolio. I think we continue to add to many of our existing positions that are benefiting from these changes, these companies that are innovating. Ankur talked about cloud computing and how we think that this is one of the most disruptive trends that we've ever seen in technology and the movement to the cloud was happening at a very rapid rate but this current situation is only going to accelerate that move to the cloud. If you look at some of our largest positions, Microsoft, Amazon and Google, they're the three big players in the cloud and they're going to benefit from those trends. They all have very strong balance sheets. They all should emerge out of the downturn in a stronger position. We're avoiding many of the other areas that I discussed earlier, such as traditional retail. For consumer exposure, Ankur mentioned Nike, which is an extremely strong brand that has invested aggressively in digitizing their company and they don't need to sell through the traditional retail channel. They can sell directly to consumers over the internet, which is a much more profitable sale than selling through the traditional distribution channels. Favoring a company like Netflix over the traditional media companies; Netflix is obviously benefiting from this current situation and also should emerge stronger, as well, because many of the traditional competitors, their financial positions are being weakened further and will struggle to be able to invest the dollars that Netflix is investing to effectively compete longer term.

Speaker Question : And how about flows in or out? Is that a concern or at this point again, you've got enough