Links To China Helped This Top Fund Early in Coronavirus Pandemic

WEEK OF JUNE 1, 2020


after Chegg announced first- quarter earnings of 22 cents per share in May. That was up 47% from the year-earlier period. Revenue was up 35%. Chegg offers online textbook rentals, both physical and digi- tal. Its Chegg Services line of- fers subscription homework help and online tutoring. The company also offers products and services that help students transition from high school to college and into their career. "Chegg is the leader in its field," Dai said. Tens of millions of students in the U.S. are cus- tomers, even more abroad. "Its services cannot be easily deliv- ered by on-campus tutors and professors because of time and access issues. So Chegg has been growing its top and bottom lines at 20% to 30% to 40% since we owned it," Dai said. The coronavirus pandemic makes students more depen- dent on Chegg. "Access to pro- fessors and on-campus tutors is even more limited now, so more students sign up for Chegg's services." Trade Desk TTD is another stock that has helped make this one of the best mutual funds. Trade Desk runs an online

"Lastly, we're looking for companies with sustainable competitive advantages," Ben- nett said. "We want companies that not only have a protective moat around the business, but a moat that's getting wider." Award Winner Its approach has paid off for this tiny fund. The fund is a 2020 IBD Best Mutual Funds Awards winner. The fund 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. During this coronavirus-chal- lenged year going into Tuesday, the fund is up 8.99% vs. a 7.77% setback for the S&P 500. The fund's large-cap growth rivals tracked by Morningstar Direct average a 2.71% decline. Chegg CHGG , which the fund has owned since early 2017, has helped make this one of the best mutual funds. "We started to follow the company at its IPO (in 2013)," Dai said. "The legacy side of the business was textbook rental. But today it is an educational service solution provider." Share price gapped up 32%

platform that is used by adver- tisers and agencies to plan, bud- get, launch, report and analyze advertising campaigns. "When we first bought (Trade Desk), its competitive position was (equal) with DoubleClick, a subsidiary of Google GOOGL ," Dai said. But in the last two years, regulatory pressure prompted Google to alter its approach to the advertising service platform space, Dai says. In contrast, Trade Desk continued to invest in innovation in the ad-support platform space and became big- ger, Dai says. Even if a coronavirus pan- demic recession continues and deepens, Dai predicts Trade Desk will grow faster than the rest of its industry. Trade Desk also invested in connected TV (CTV), as stream- ing TV is known. Revenue for CTVwas growing at more than a 100% annualized rate pre-coro- navirus pandemic. That slowed to a 20% annualized pace early in the pandemic correction, then rebounded to 40% in early May. CTV "will gain more mar- ket share coming out the other side" of the pandemic, Dai says. Ollie's Bargain Outlet OLLI also helped make this one of the

best mutual funds. Shares have soared 60% above where they stood before the coronavirus stock market correction. Not only does Ollie's appeal to the bargain hunter in any consumer, the discount chain also benefits from the volatil- ity roiling the brick-and-mor- tar retail space. "They benefit from the turning of the retail base," Bennett said. "When Toys R Us went bankrupt, Ol- lie's was at the front of the line getting deals on discount toys, selling toys at their own stores at 30% to 40% or higher dis- counts." Ollie's also offers merchan- dise that appeals to a wide range of consumers. "Their stores are in areas that border blue- and white-collar areas. They sell es- sentials to blue-collar consum- ers. They sell high-end goods like Cuisinarts that may be an odd color for sweetheart prices to white-collar consumers." If you can't buy shares of this fund through your retire- ment plan, consider its sibling portfolio, $733.8 million Al- ger Weatherbie Specialized Growth Fund ASIMX , which uses the same structure, allocation and strategy.

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