Portfolio Insights: Alger Weatherbie Specialized Growth


George Dai: We believe that three things really differentiate us from our peers. One is we are specialists and are dedicated to investing in the smaller cap part of the market, which is highly dynamic, meaning things always change, and very inefficient as well. People know that the sell side has reduced the coverage to this part of the market dramatically over the last several decades. Second is we fish in a different pond. What does that mean? That means we invest in the technology and health care space. But we also find a lot of value- creating companies and stocks in so-called mundane industries. For example, let's say the junkyard, auto parts companies, the waste management companies, the residential real estate service companies. And point number three is we do have a multi-PM sleeve approach. Our strategies at Weatherbie Capital are managed by several portfolio managers, and all of us have had lots of experience under our belt. So one key benefit is it provides additional layer of risk mitigation at the PM level, which the single manager approach does not have. So these three points combined make us quite different from most of our peers. We believe it works for our goal, and we intend to further carry this strategy on and to continuously improve as I discussed before.

frequently and we challenge each other, however, without the worry that our opinions may get lost, and we uncover each other's blind spots.

At the end of the day, all managers have their own real- time returns, so we are held accountable for what we do and we do our best to create value while mitigating risk. We believe that really suits our culture. And we have done this for this particular product for about 10-1/2 years and the numbers really speak for the effectiveness of this approach.

Tyler Foster: Could you comment a little bit on how you and the team have navigated pretty notable ups and downs in the market related to the COVID-19 crisis?

George Dai: Sure. That's actually the most recent testing time that we just went through and historically whether we had been doing this for multiple decades – and I personally have gone through this professionally at least three times. We have taken the opportunity to use the volatility to our advantage to attempt to create value for our clients. So how did we do that? The U.S. economy came into this year very strongly and the unemployment rate was below 4 percent. That was the best in the last 50 years. However, there was a threat that most people were not aware of. That was the coronavirus coming to haunt the world. We at Weatherbie Capital became aware and were closely monitoring the situation because I came here from China many years ago and I still have family and lots of friends and classmates that live in China. We were hyper alert in terms of the potential damage and threat to the global economy. And then the dark cloud finally came; we believe we were very well prepared. We made two defensive moves followed by two offensive moves in the last few months. First let’s look at the two defensive moves that we took in late January and early February after realizing that the coronavirus will have a much more significant impact on the U.S. We substantially reduced position sizes of holdings with significant exposures to China – either in revenue or in supply chain. An example would be Wayfair and some other smaller positions.

Tyler Foster: Could you comment on the benefits that you see for the multi-PM structure at Weatherbie compared to the traditional single-PM approach?

George Dai: Yes. This multi-PM approach marries the benefits of a single-manager approach and the traditional team-based approach. In our view, the three benefits of the single-manager approach are agility, accountability, and independence. In our multi-sleeve approach, we have all of these because each portfolio manager, as long as we stay well within the risk perimeters that we define way ahead of time, is acting as if you are managing an independently managed fund.

At the same time, we have the benefits of a committee- based, consensus-driven team approach. We get the intellectual stimulation of a team. We communicate

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