Portfolio Insights: Alger Weatherbie Specialized Growth Strategy

TRANSCRIPT

Josh Bennett (continued): The way this is playing out as the vaccine rolls out is with hospitals now reopening to elective surgeries and they will do so further as vaccines come available. This pent-up demand is going to flow through the system and our confidence that names like Nevro are going to recover and benefit has definitely paid off.

the election, but the reality is we believe our portfolio is well positioned whether it's a Biden or a Trump win.

Speaker Question: Josh, I was just wondering if you could go over the sell discipline, when you guys decide why you would get out of a name, if the thesis doesn't work or what have you. Josh Bennett: Our sell discipline we've really implemented over decades now at Weatherbie Capital. We sell for a few reasons. First of all, we would think about selling a stock once it gets sustainably above kind of our max market cap range. So the Weatherbie Capital style is that we want to get into a company before it hits $2.5 billion in market cap and then we're willing to let those winners run up to $15 billion market cap. Once names get sustainably above that $15 billion market cap level, we begin to move out of those names and we will move out and sell those names. That would be number one: the market cap gets too high. Number two would be if a company gets acquired and this is one of the exciting, but challenging things in small cap growth investing is that acquisitions happen on a regular basis. So we'll see typically two companies, sometimes three or four companies from our Weatherbie 50 stocks, they'll get acquired in a given year and so that creates the opportunity to kind of feed a fresh name into the Weatherbie 50. And then finally, and this is kind of what happens most often, there are names for which we bought the name on a particular investment thesis and as time goes by, we certainly don't bat a thousand. We may do well but we don't bat a thousand and when we begin to see that thesis fraying around the edges, what you'll see is that the portfolio managers at Weatherbie Capital, of which I'm one of the portfolio managers, will begin to bring that position down in our conviction-weighted sleeve, which brings the position down for the overall portfolio.

Ted Doyle: Thanks, Josh. The line is now open.

Speaker Question: Given whatever side wins the election, how do you expect it to affect capital gains and the monetary policy? And how do you see that affecting how you're positioned in the market? Josh Bennett: Regarding the Weatherbie portfolio, I mentioned in my opening remarks that the election is something that we're monitoring very closely as it's clearly the biggest macro event in the near term, but we're not necessarily positioning our portfolio for or against a Biden or a Trump win. That's just not the way we think about it. We tend to think through these things and create a portfolio that we believe can succeed regardless of who wins. I would say that some of the clear impacts on the portfolio are on the health care side. Whether one wins or the other wins, you could see some implications on drug pricing, for example, or on how quickly drugs get approved. You typically think of a Republican win as being better for defense stocks. The reality is, looking back over history, defense stocks are much more tied to the threat level than they are to whether it's a Republican or a Democrat in the White House or dominating Congress. What you see as you dig deeper into each of these kinds of factors and the way they impact stocks in our portfolio is quite often the election is less of an important factor to the portfolio than you might think it is when you're willing to kind of look out over a longer timeframe, which is exactly what we do at Weatherbie.

We tend to have a longer time horizon, we do deep research on our companies and so there are little things around the edge that we might do if we have a hunch on