Portfolio Insights: Alger Weatherbie Specialized Growth Strategy
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.
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