Portfolio Insights: Alger Weatherbie Specialized Growth Strategy
Josh Bennett (continued): So, we were already pairing some of that back and what we like to say is we upgraded the already high quality of our portfolio even further. So, takes them out of companies that might be exposed. By March, we were looking at the balance sheets of every one of our companies and we were looking at the debt structure of every one of our companies and liquidity. We had multiple meetings over about a two- week process in March where we reviewed the liquidity and the cash burn potential of each of our companies, and again, repositioning, so we were looking at – this is still in the defense mode, we were looking at what are the companies that we need to pair back here, and what are the higher quality companies among the spectrum of 50 that we own, that we could kind of add to, to further upgrade the quality of the portfolio. By mid-March, we were already shifting gears out of defense mode and into offense mode. What I mean by that is, I mentioned that we sort of have our rule of thumb as we get in before $2.5 billion. So, we had, by that time, several names, like a Wingstop for example, that had dropped into our market cap. Wingstop was a name that I’d known since IPO, but it very quickly ran through our upper cap limit, and now Wingstop was suddenly a name that we could buy in our portfolio. We looked for opportunities like a Wingstop to eliminate positions that might have a bit more exposure and add to names that we know we want to own for multiple years into the future. The shift from being early on defense in the January, February timeframe, but then by March, certainly by mid to late March, shifting from defense into offense mode and looking for opportunities, that helped us navigate this crazy time in a way that really helped drive the performance this year. Jackson: Josh, let’s jump into 2021. What’s the Weatherbie team excited about, whether it’s by sector, whether it’s by trend? What do you think 2021 expectations should be?
Bennett: Sure. So, I’ll tell you, Jeremy, that what we’re probably most excited about in 2021 is just a return to some sort of normal growth environment, and we do think that that will happen, and what tends to happen in an environment like that is the companies that have been hyper focused on just surviving this downturn, making sure that they take advantage of the downturn however they can, can now get back to implementing the processes, the procedures, the strategic plans that they had in place pre-COVID. Now the world has changed, and so they’re going to need to modify those strategic plans, but frankly, we’re excited to just see sort of a return to a normal growth environment. We don’t tend to think of really hot opportunities in terms of sectors, but I’ll tell you that we’re finding ideas today in health care. We’re still finding ideas today in technology, and we are still finding these sorts of off the beaten path, diversified growth, diversified business services growth stocks, so we’re finding ideas everywhere. What we tend to find is – well, a lot of people ask us, when do we sell? Well, I mentioned already that we sell above $15 billion, but we’re also seeing some of our companies get acquired like a Pluralsight for example, which was just kind of announced that it’s being acquired. That was one of our companies that was earlier in the year, a company called Dermira, so the companies get acquired, they leave our portfolio, companies kind of graduate and leave our portfolio, as these companies leave our portfolio, we’re finding great opportunities in this smaller cap space, and again, we sort of let the big ones go and then we find great opportunities sub $2.5 billion, and we begin the process over. It’s kind of the repeat, reuse, and continue to drive value for our clients. So, I don’t want to necessarily point out specific sectors because I think that – I mean, you should see it in consumer, you should see it in technology, you should see it in health care, and you’re going to see more of these kinds of off the beaten path companies that many of you have never heard of that we’re going to find, we’re going to discover, in fact we already know a lot of them that we’re doing our work on right now, you’re going to see those creeping to the portfolio, but I do want to kind of emphasize the fact that our turnover tends to be much lower than the average portfolio out there.
Conference Call 7/10
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