Portfolio Insights: Alger Weatherbie Specialized Growth Strategy

Portfolio Insights: Alger Weatherbie Specialized Growth Strategy


Portfolio Insights: Alger Weatherbie Specialized Growth Strategy

Joshua D. Bennett, CFA Senior Managing Director and Director of Research Weatherbie Capital, LLC

Josh Bennett recently hosted a portfolio update with clients in the Alger Weatherbie Specialized Growth strategy. To kick off the call, Brad Neuman, CFA, the firm’s director of market strategy, shared his views on the markets and the economy.

questions prepared for Specialized Growth Portfolio Manager, Josh Bennett, after which we'll open it up for questions to all of you on today's call. So, with that, Brad, I'll turn it over to you. Brad Newman : Thanks, Alan. I just want to give a bit of a macroeconomic picture. First, I'll begin with some of the negative data points and then move on to some of the more hopeful data points that we've gotten in recent days and weeks. Including data released this morning, 33.5 million people in the United States have filed for unemployment in the past seven weeks pushing, we believe, the unemployment rate up to about 25%. Now that's higher than the official figures through April that we'll see tomorrow morning at 8:30 AM, but certainly painful for the people of the United States and for the economy. Shelter in place has obviously driven down spending with Bank of America credit card data showing spending down nearly 20% in late April and into early May with spending on airlines, lodging, entertainment down some 70% to 100% and restaurants down about 50%. All of that is forcing global GDP to be down about 3% to 4% this year, which is twice as bad as the Global Financial Crisis, and the U.S. is likely going to be down mid-single digits for the year in terms of GDP and possibly 30% to 40% for the second quarter.

Please note this transcript is from a call on May 7, 2020, and it has been edited for clarity and brevity.

Alan Kirby : Thank you all for joining our Alger Weatherbie Specialized Growth strategy update call. My name is Alan Kirby. I'm the client portfolio manager at Alger and I'm joined on today's call by Brad Newman and Josh Bennett. Today all of us are facing unprecedented challenges not only in the investment markets but in all aspects of our lives. The COVID-19 virus has had a profound and heartbreaking impact across the globe and our families, our friends, our travel have all been disrupted. At Alger, we hope and we pray that you and your loved ones stay safe and healthy through this crisis. We also want to thank you for your confidence in Alger’s investment capabilities. We're fortunate to have great investment professionals, but we also have outstanding client service and relationship management teams and all of our resources are at your disposal. Our team stand ready to help you in any way we can. And if there's anything that we can do to support you or your clients, please reach out to your Alger representative and let us know how we can help. On today's call, we have Brad with an update on the capital markets. And following that we have a few


In the first quarter U.S. earnings season, which is ongoing right now, more than half of companies have reported thus far and EPS is reported to be down about 15%, and in all indications the second quarter will be even worse, but there are some reasons for hope. First, the stimulus has been robust. The Federal Reserve balance sheet has increased some $2.5 trillion since the end of February and U.S. fiscal stimulus has been about $4 trillion if you include Federal Reserve leveraging. A couple of weeks ago, only about 7% of the U.S. was not under stay at home orders, but today more than half the country is not and in a few days that number will be about 80%. According to Apple, the mobility of U.S. citizens is up about 15% in the past week, although it is still some 20% down from pre-pandemic levels. In the credit card data that I mentioned a moment ago, there's a silver lining there. First off, the decline of less than 20% is much better than the 40% or so we saw at the end of March that may be due to the stimulus checks that started arriving around that time. Also there are pockets of growth within that downward spending such as e- commerce, which is up 75% and it is broad based among electronics, home improvement, food and apparel. This last thing, maybe the most important observation I can make and one we'll probably hear more about from Josh, is that many of the most innovative companies are seeing relatively less impact from the pandemic. Some are well positioned, like those that are enabling the digital transformation of the economy, and are actually seeing increasing tailwinds. We see that within the current earnings season with sectors like health care and technology having the best earnings season so far, beating estimates and posting EPS growth of 12% and 6%, respectively, despite the pandemic. We can see some reason for optimism going forward, particularly for skilled stock pickers. And with that, I’ll turn it back over to you, Alan. Alan Kirby : Thanks very much, Brad. Appreciate the update. Many of you on the call today are familiar with Weatherbie Capital and its team-managed strategy Alger Weatherbie Specialized Growth. Josh Bennett is

the director of research at Weatherbie Capital. Josh is also a portfolio manager on the strategy. He has research responsibilities in the consumer, industrials, technology, and diversified business service areas. We had a call with Portfolio Managers George Dai and Matt Weatherbie in March, right after the major decline in the U.S. markets. Can you give us a sense of what's gone on in the portfolio since then? Josh Bennett : Well as you mentioned, our last call was about four or five weeks ago and we talked at a high level on that call about how our initial response as a team was to rally together, dig deep and really review what do we own in the portfolio. Determine what is going to be the impact of COVID-19 on the various business models and balance sheets that those companies that we own. It was more of a kind of defensive initial response. But from there, we rapidly turned around and shifted from defense to offense and focused on positioning the portfolio for recovery from these tough times. If you think about the way we work, our work format by necessity has had to change. We've shifted from face to face meetings to having a lot of calls and a lot of video conferences. But if you think about the way we do our job, we continue to use the same tools to dig deep on the financials, to meet with industry experts and then to rally around on video conference calls with the entire Weatherbie team oftentimes multiple times a day. So we've adapted and it's actually been working pretty well. We found some great new and exciting ideas. A lot of new opportunities are actually coming out of the current environment. Alan Kirby : Brad just mentioned earnings season, so now we're in the midst of it and it sounds like you and the rest of the team are speaking to management of the companies that you invest in. How many of the Weatherbie 50 portfolio companies have reported so far and can you share some insights with us on what you're hearing from these management teams?


Josh Bennett : Sure. It's a very busy week for the Weatherbie team. We are almost exactly at the halfway point right now. Twenty-six of the Weatherbie 50 names have reported. And of the top 10, which make up more than 45% of our assets, half of the top 10 have reported and we'll see more over the next couple of days. These are smaller cap companies, it's what we've always focused and specialized on at Weatherbie Capital, and what we're seeing as a consistent pattern that until mid- March, most of these companies were not only on track, but many were actually talking about a strength relative to expectations that things were going much better than they had expected until the last two weeks of March. Not surprisingly, the last two weeks of March and into April, they've seen pretty significant change. But what we're seeing in particular in the back half of April, and some are even talking about what they've seen so far, just kind of early results so far in May, is we're seeing our companies are talking about how their businesses are stabilizing, even if that means stabilizing at lower levels or some are actually beginning to improve. Many of our companies not surprisingly are withdrawing their 2020 guidance, but we are beginning to see some broad insights about the road ahead. What we've noticed as we looked at our businesses in the Weatherbie 50 portfolio is that it was a radical difference depending on the type of business model that they run. We saw that most of our companies thought fell into three buckets and one bucket is we saw that several of our companies were actually helped by the COVID-19 situation or they saw very little impact. The second bucket would be companies that might have seen an immediate hit to their business, but we believe they should be well positioned for a steep or even immediate recovery. once the people go back to work and kind of the stay at home is lifted. And then the third bucket is that some were hit maybe to a lesser extent initially. But what we're noticing is that these could potentially have longer lasting impacts on growth prospects. And quite often actually for the better because their competitive positioning is actually significantly improved coming out of these tough times. It depends on the

business, but we tend to see our companies falling into one of those three buckets.

Alan Kirby : That's interesting. The three different buckets. Based on that, how is the team positioning the portfolio now? Are there any subtle shifts that you're making as you look ahead? Josh Bennett : Let me begin by saying what has not changed. Since the firm was founded in 1996, we have followed the same key investment criteria. Nothing about the core strategy and what we're looking for in companies has changed in any way. I also want to remind everyone on the call that we've been through volatility before. The portfolio manager team has been working together for over 12 years, nearly 13 years. This is our flagship product and what we've done in previous periods of volatility is what we're doing again. When the market overreacts to the downside, we're always looking for ways that we can try to improve and upgrade the quality of the portfolio to an even better level. We look to trim up opportunistically and look to add to names that are a bit more stable. And perhaps an example would illustrate this. A company like FirstService Corporation reported earnings about two weeks ago. And on my call with the CFO following the earnings call in late April, relative to a lot of other companies that are out there, they've put up a strong quarter. They're very careful about the guidance in their second quarter. And we think that there are portions of their business that might see some pressure, but we're confident in following that call and our meeting with the team to talk about ideas that we believe the company will be a better and stronger company in three to five years. And one day we'll look back and realize that the steps they're taking now to cut costs, to manage operations, to focus marketing are going to position them much better relative to the competition in the coming years in our opinion.

Alan Kirby : Can you talk to us about some of the drivers of that recent performance?


Josh Bennett : What we've noticed is that we can look at this on a sector basis, but even within sectors, it tends to be that you have companies that are performing great and others that are not performing as well. Take for example, the health care sector. We had some very strong performance from the health care sector out of two names in particular, Acadia Pharmaceuticals and Insulet. And I'll just talk quickly about those two companies and why they performed well. And then we'll talk about Glaukos, which did not perform as well in that group. Acadia is a pharmaceutical company focusing on the development of small molecule drugs to address medical needs and the in kind of central nervous system disorders. They are not going to be impacted by a lot of what's happening due to COVID-19. In a similar way, Insulet. They develop and manufacture insulin delivery systems for people with type one and type two diabetes. If you think about diabetes, that problem obviously does not go away because of COVID and home stay programs. So both of these companies were much less impacted by COVID-19 than the broader sector. On the flip side, there's a company in our portfolio called Glaukos, which is a medical device company specializing in optical stents that need to be implanted in your eyes to help glaucoma. Given that this is an elective procedure, patients are essentially being forced to delay these procedures during the COVID-19 shutdown. You can see that we had several names in the sector that performed quite well and really drove recent performance, but you're always going to have some names that if there's going to be impacted by COVID- 19, they're going to be detractors.

add a name that's above $2.5 billion in market. There are several companies that we know well and that we followed for years. We've met with management multiple times. We've done significant research on the companies, but given that they blew through our $2.5 billion cap limit for an entry position, we had to let them go and continue to watch them. We had the opportunity to get dialed in and focus on finding these next Weatherbie stocks, some of which will come from names that are below that $2.5 billion giving us the opportunity to establish the initial position. The team is focused, the team's working incredibly hard. We are remote, but we feel almost like we're not remote given the number of calls we're on face to face on video and we're finding some great and exciting ideas for the portfolio. Speaker Question : I have a question about Siteone Landscape Supply. I have a lot of contractors that are landscaping contractors and Siteone has been buying up every single one of the supply houses out here and they've all called me to ask me about the company. But they've said that the level of service has gone down now as a result of the consolidation, that the mom and pop feel to some of these supply houses that they had, some of the credit that they were being extended. I know that you guys have a position in Siteone. Have you guys been talking to management about how they're integrating and how they're going to address that as a concern? If they even are aware of it yet. Josh Bennett : Absolutely. Thanks for the question. Yes, Siteone is a company that we've known and owned for multiple years now. If you think about what they do as you mentioned, they're the leading consolidator in the industry. They're going around and buying up the best kind of regional mom and pops or sometimes it's broader than a mom and pop more but almost mini corporation in each region. And you're right, they do kind of institute more corporate policies. The feedback that we get in the industry calls that we are doing on an ongoing basis has actually been quite positive. Alan Kirby : Thanks Josh and operator at this time, let's open the call up to a Q&A from any of the folks that we have on the line today. Thank you.

Alan Kirby : Well, thanks for that insight on all three of those companies. Before we move on to Q&A from everyone, any final thoughts?

Josh Bennett : There are so many fast growing exciting companies that we're finding and we actually think that the current environment is creating some exciting opportunities to build the portfolio, to add names, small positions that we see likely to be built up over time. I'm sure everyone on the call will remember that we won't


I had a meeting with Siteone recently and what they're seeing is they're actually benefiting from the technology applications that you can do as a larger corporation, even in an industry like this. For example, they rolled out Siteone.com, which is a website but also an app that landscapers can, the night before they go onsite the next day, order all their materials. They can literally have all the materials they need for the next day delivered right to the site. It's an incredibly powerful tool that saves you time or if you want to pick it up yourself, it's already on a pallet and ready to go. I'm sure there are some people who would find reasons to complain about a company like Siteone. Inevitably it's going to become a bit more corporate. They don't buy the loser in the region. They buy the best players in the region. They keep those people on. Those people keep those relationships with the local contractors. And it's an incredibly strong model. I think there's a lot more upside when Siteone corporation moves in and kind of professionalizes a market like they do. Speaker Question : I'd like to know if the team is looking at any artificial intelligence (AI) companies and if so, what are your top few picks? Thanks. Josh Bennett : We are absolutely investing in AI. The application of AI is interweaved into many of the companies that we're looking at. We're always keeping an eye open for companies that are specific or exclusive to AI. What we're noticing is that AI is a tool that's being integrated into the business model of many of our companies. For example, XPO Logistics on the transportation and logistics side. They're using artificial intelligence machine learning on a very active basis to look at their labor staffing program for example. Inevitably transportation has seen some pressure and needs to quickly adjust staff. They can do that by looking at the time of day, the time of the year, the month the data that are coming in about new orders coming in that needs it then quickly be turned around. Their labor staffing tool is using AI and machine learning in a way that is much more powerful than just the paper format that people used to use in scheduling workers. You can schedule

workers literally throughout the day to come and go as they're needed and effectively leverage the labor since labor is in short supply.

Similarly, XPO Logistics also has a warehousing operation. They're using artificial intelligence to help them decide where in a warehouse you would put certain types of products and certain freight. They're possibly using the application of artificial intelligence to optimize their system, to optimize their network from a labor perspective, from even an asset placement perspective at a warehouse. I could go on and on about other examples of AI, but I would say that as I look at our portfolio of 50 companies, we're seeing the application of AI throughout many, many of our companies. I would say that the vast majority of our companies are using AI in one form or another. Speaker Question : A question on a couple of names in the portfolio that have been impacted by the current environment. One being Planet Fitness. I know a couple fitness chains have gone bankrupt. Curious as far as the current environment, how they're going to come out of that. And also Wayfair. You had some concerns about the supply chain not too long ago. Why don't we get your thoughts on those two? Thanks. Josh Bennett : Sure. Thanks. And again, thank you for being a long time partner with Weatherbie Capital. We really appreciate your business. Let's talk about Planet Fitness and then Wayfair. We would put Planet Fitness in the bucket of a pretty severe impact in the near term from the stay at home mandate and essentially gyms being forced to close, but we believe they’re squarely in that bucket of companies that are going to benefit in a tremendous way when they come out the other side.


I'm reading the news as you are. We're doing our due diligence on the industry and you're seeing companies like 24 Hour Fitness is in trouble. Gold’s Gym going bankrupt, Equinox not paying rent in New York City. You are seeing a significant trend towards the typical competitors of a Planet Fitness, although not all of these compete. I can talk about that in a moment of really being under severe stress. Planet Fitness reported earlier this week and obviously we were on that conference call and we'll follow up with management very soon, and we feel like they're actually managing through this the best that they can. This is exactly why you go for what we believe are top notch growth companies with strong management teams. For example, they have leveraged with their equipment suppliers so they can use that leverage to manage equipment purchases going forward. They have an app already rolled out and they're very actively using that app to stay in contact with their people and even provide workouts that they can do at their homes so they can stay connected. Planet Fitness is doing all the right things to manage through, in our opinion. That said, they were squarely in that bucket of companies when we were in defense mode we were looking very closely at what's the impact, but we believe they will be stronger on the other side. That said, we did bring down that position that when we had early signs that things were going to get difficult. Wayfair is one of the largest providers of home products, furniture and home furnishings. They’re growing faster than Amazon, they are an incredibly strong player. Earlier in the year, we were worried about their ability to get the supply of product from emerging markets and China in particular, so we trimmed back the position. But not too long after that we continued to do work on Wayfair as we always do and we began to get feedback that made us think that the company was better positioned maybe than we had thought and that they were very quickly finding new sources of supply for product and working that into the system. We actually are quite favorable on Wayfair and continue to have a position there and sort of went from initial caution to excitement. People are staying at home and they're investing in their homes, so they're investing in

upgraded furniture and rooms. If you're going to be home, you might as well enjoy your kind of home environment and Wayfair is a beneficiary of that.

Speaker Question : Hello. I think one of your top positions is Chegg and they certainly seem to be in the sweet spot on online learning. My question is, do you feel still think the stock in relation to the stock price, the growth? Do you still like it? And as a caveat I mentioned it to my son and he said, Oh yeah, a lot of people have those accounts and some people use that to get answers and cheat. That was his first reaction. I'd want to know if you ever looked at that aspect of it as a downside and whether you still like the stock? Josh Bennett : Sure. I can't comment on current trading, but let's talk about Chegg. They're in that bucket of companies that are going to or have seen a nice uptick in their business because of the way education is changing. And that was already the case pre-COVID. We felt like COVID is actually driving that even that tailwind even stronger. This issue of Chegg as a cheating enabler has been around for quite some time. We've been incredibly familiar with this. We've done a deep dive on this. There've been short reports that were put out by kind of short report experts talking about Chegg as a cheating tool. We've made countless calls with universities, with an industry kind of experts on this topic exactly. Without a doubt there are going to be people who use Chegg as a tool for cheating and that's something that we can't avoid. But there are plenty of other tools that are purely designed for cheating that Chegg is very different from. There are tools out there on the web that will write term papers for you that will literally spit out the answers and write them in a way that you can pass off as your own work. For those who aren't familiar, what Chegg does is they have unique arrangements with the publishers of textbooks such that if anybody has kind of questions, let's say my daughter who is studying organic chemistry right now has a question on a problem in organic chemistry textbook, she can take that exact question, put it in the Chegg system, and Chegg will help her solve that problem the night before. And she's going to see something similar to that on the test.


The only way you could use Chegg as a cheating tool would be if a professor is taking the exact problem straight out of a textbook and using those as test questions, which would probably not be a great way of teaching anyway. All that to say, we've done significant research on this kind of issue of Chegg being used as a cheating tool. We believe that that's the minority of cases and in the vast majority of cases, Chegg is an incredibly powerful tool that's helping students who are stuck at home and no longer have access to tutors or to teaching hours or to kind of peer learning assistants. Speaker Question : I had a question about Everbridge. I wanted to see what your thoughts on that one and if you had looked at AudioCode, which is one of their competitors in a similar sector and wanted to know if you had your eye on that stock as well? Josh Bennett : Everbridge is another name similar to Chegg that's in that bucket of companies that are in our portfolio that are helped by the current situation. Everbridge, for those who may not know, is a company that focuses on what's called critical events management. When things go wrong, when there are global pandemics, when they are terrorist strikes, when there are a significant weather events, the most important asset for most companies these days is their people. And Everbridge helps you make sure that you can track down your people and make sure that they're

Speaker Question : You mentioned the three buckets that your companies are falling into. Can you comment on the companies that did not fit any of those buckets in terms of which companies may have left your portfolio after the first quarter or between the first quarter and now? Josh Bennett : Thanks for your question. We can't comment on recent trading activity, but I can tell you at a high level that the way to think about it is when you look at our portfolio, what you tend to see is on the larger end of our portfolio, again, the top 10 positions are over 45% of our assets. We are a true focused strategy. We only own 50 names with a top 10 being nearly half of our assets. When you get down to the bottom 10, bottom 15 names, those stocks are going to fit into one of two categories. They're either going to be names that we recently added to the portfolio, where we're doing more in-depth research and we think that they have potential to become one of the top positions in the portfolio over time. Or you are going to see names that used to be larger positions in the portfolio, we think that there are still good growth prospects, but we're evaluating them carefully. And the great discipline that we have is since we're only going to own 50 names, we have a constant influx of new potential Weatherbie Capital growth stock ideas that are fighting for a slot in the portfolio. And when we come across one, and again through thorough research, you're likely to see a 20-page or 25-page report. You're likely to see an in-depth discussion of an hour and a half, sometimes two hours on one name where the entire team comes prepared. Many of you have heard me talk about this process or one of our team members talk about the process. Let's say we get to the point that it's going to be a new idea. It's going to be out one of those bottom positions. The names that you're talking about that don't fit into the buckets and maybe are going to be kind of more permanently impacted by COVID are likely to be some of the very small positions in our portfolio. And you are likely to see some churn around those small names as we're coming up with some great new ideas to replace them. Does that answer your question?

since IPO, maybe even before IPO, three of us have been to the headquarters multiple times, know the company very well.

AudioCode is a company that we know from the due diligence that we've done on Everbridge. I can't comment on whether that's something that we would necessarily add to the portfolio, but suffice it to say we know Everbridge well, which means we know the competitors well and we feel like this area of critical events management and being able to make sure your people are safe, your most important asset is safe, that's going to drive value in Everbridge for years to come.


Speaker Question : It does. Thank you for that. But how many would you say would be in your bullpen normally that have a chance of fighting for the top 50? Josh Bennett : We don't think of it in terms of a bullpen. It is a steady flow of ideas. We have five analysts who are looking for ideas. You may remember that George and I, even though we're senior portfolio managers on this product, we also cover names. And then you have Ed and Dan and our most recent hire as well, who's following health care services. We have five people who have been assigned areas of the market. Dynamic growth areas is what we call them, all hunting for ideas and coming up with a steady stream of ideas. We have a constant inflow of ideas ready to come in. And as those ideas fight to come in, they're going to push out the less attractive, smaller names in our portfolio. Speaker Question : Sorry, Josh. I'm back. There was a short report out on eHealth that got a fair amount of press. Any thoughts that report and your comfort level with the stock? Thanks. For better or for worse, this has become a reality of working in the smaller cap growth space. There are companies that are out there, and I won't name the names, but their business is essentially to sell their service to folks who want to come up with short ideas. They're always these small elements of truth that are sprinkled throughout these short reports, but then they're way blown out of proportion and typically under- researched. In the case of eHealth, we did what we always do, which is immediately get our hands on the short report, go through it in detail. We have a primary set of eyes on that name. and then quite often multiple other analysts or portfolio managers will also dig in and review. And that's exactly what we did. In this case, we had a meeting specific to eHealth, talking about the short report and what portions of it might be true and what Josh Bennett : Yes, we were very aware of the short report. It might be informative to talk about how the team reacts when that happens.

portions of it were clearly not true. So we'll go through point by point.

By the way, these short reports almost always come out when the company is in a quiet period, so the company isn't allowed to respond and we're not allowed to speak to the company. That's done on purpose to try to drive the stock down, given the short positions already in place. We're very aware of the short report. We had a meeting called specifically to talk about that short report and our response to it, but I can't talk about recent trading action around eHealth, but we do see that as a strong business model. Alan Kirby : Josh, thanks for addressing those and to everyone who had questions for a say, if you have additional questions regarding Alger the portfolio, please reach out to your Alger representative and let us know how we can help. Thank you all for participating on today's call. Please stay safe.


The views expressed are the views of Fred Alger Management, LLC (“FAM”) and Alger Management Ltd. (together with their affiliated entities “Alger”) as of May 2020. Alger has used sources of information which it believes to be reliable; however, this publication is not intended to be and does not constitute investment advice. 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 Alger. Risk Disclosures : Investing in the stock market involves risks, and may not be suitable for all investors. Growth stocks tend to be more volatile than other stocks as their prices tend to be higher in relation to their companies’ earnings and may 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. Past performance is no guarantee of future results. Investors whose reference currency differs from that in which the underlying assets are invested may be subject to exchange rate movements that alter the value of their investments. Important Information for US Investors : This material must be accompanied by the most recent fund fact sheet(s) if used in connection with the sale of mutual fund shares. Fred Alger & Company, LLC serves as distributor of the Alger mutual funds. Important Information for UK and EU Investors : This material is directed at investment professionals and qualified investors (as defined by MiFID/FCA regulations). It is for information purposes only and has been prepared and is made available for the benefit investors. This material does not constitute an offer or solicitation to any person in any jurisdiction in which it is not authorised or permitted, or to anyone who would be an unlawful recipient, and is only intended for use by original recipients and addressees. The original recipient is solely responsible for any actions in further distributing this material and should be satisfied in doing so that there is no breach of local legislation or regulation. Certain products may be subject to restrictions with regard to certain persons or in certain countries under national regulations applicable to such persons or countries. Alger Management, Ltd. (company house number 8634056, domiciled at 78 Brook Street, London W1K 5EF, UK) is authorized and regulated by the Financial Conduct Authority, for the distribution of regulated financial products and services. FAM and/or Weatherbie Capital, LLC, U.S. registered investment advisors, serve as sub-portfolio manager to financial products distributed by Alger Management, Ltd. Alger Group Holdings, LLC (parent company of FAM) and Fred Alger & Company, LLC are not authorized persons for the purposes of the Financial Services and Markets Act 2000 of the United Kingdom (“FSMA”) and this material has not been approved by an authorized person for the purposes of Section 21(2)(b) of the FSMA. Important information for Investors in Israel : This material is provided in Israel only to investors of the type listed in the first

schedule of the Securities Law, 1968 (the “Securities Law”) and the Regulation of Investment Advice, Investment Marketing and Investment Portfolio Management Law, 1995. The Fund units will not be sold to investors who are not of the type listed in the first schedule of the Securities Law. The following positions represented the noted percentages of assets in the Alger Weatherbie Specialized Growth strategy as of 2/29/20: Chegg, Inc., 5.94%; FirstService Corp., 5.76%; Everbridge, Inc., 3.78%; Insulet Corp., 3.14%; Planet Fitness, Inc., 3.05%; Siteone Landscape Supply, Inc., 2.85%; Glaukos Corp., 2.74%; Acadia Pharmaceuticals, Inc., 2.38%; eHealth, Inc., 1.08%; XPO Logistics, Inc., 0.85%; Wayfair, Inc., 0.64%; 24-Hour Fitness USA, Inc., 0%; Bank of America Corp., 0%; Equinox, 0%; Gold's Gym International, Inc., 0%; AudioCodes, Ltd., 0%; and Apple, Inc., 0%.


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