Portfolio Insights: Large Cap Strategies

Portfolio Insights: Large Cap Strategies


Patrick Kelly, CFA Executive Vice President Portfolio Manager Head of Capital Appreciation and Spectra Strategies Patrick Kelly recently provided a portfolio update for clients in the Alger Capital Appreciation, Focus Equity, and Spectra strategies. The call was hosted by Jessie Quick, a vice president and regional director in our distribution organization. Portfolio Insights: Alger Capital Appreciation, Focus Equity, and Spectra Strategies

Patrick Kelly: Sure. Well it has been a crazy and unusual year. That's for sure. I feel like I've seen it all after this year. I'd make some high-level comments about the markets and equities. We continue to remain positive on U.S. equities despite the COVID situation, which has obviously had a significant impact on economic growth. The U.S. equity markets continue to be supported by highly- accommodative and unprecedented fiscal and monetary stimulus. Global policy stimulus has exceeded $20 trillion in 2020. Global interest rates are at an all time low. Now it's just 70 basis points. Macro indicators are signaling a bullish environment for equities with a weaker dollar, strong commodities, tighter credit, lower volatility, and improve emerging European markets. We are also positive and focused on the Fed's evolving strategic policy shift and the major investing implications resulting from it. The Fed is now basically raising the inflation bar required to raise rates which is a major shift in Fed policy. We are seeing this strategy shift have an impact across global asset markets as investors price in sustained negative real yields. And this is leading to a rally in bonds and equities. Investors are looking for yield with the Fed pinning short-term rates close to zero for what looks to be a sustained period of time. There's over $4.5 trillion in U.S. money market funds that are basically earning zero yields and money market funds have fallen more than 90 percent since the beginning of March.

Please note, this transcript is from a call on August 12, 2020 and it has been edited for clarity and brevity.

Jessie Quick: Thank you so very much for joining us. We're joined today by Portfolio Manager Patrick Kelly. He is the head of Alger Capital Appreciation and Spectra Strategies, which includes Alger Focus Equity. He joined Alger in 1999 and has 23 years in investment experience. Patrick excelled through the Alger Analyst Training Program and ultimately became a senior analyst responsible for the technology sector. He was

then named portfolio manager of the Capital Appreciation and Spectra Strategies in 2004.

Patrick Kelly: Thanks, Jessie. It's good to talk to everyone, and I appreciate everyone for taking the time to be on the call today.

Jessie Quick: Wonderful. Thank you. So with introductions covered, let's dive right into this conversation. First off, Patrick, let's begin by you giving us an overview of where find ourselves today. As we wrap up this second quarter earnings season, we'd all love to hear your overview points and what you would highlight right now for our listeners.


Patrick Kelly (continued): Currently over 70% of companies in the S&P 500 have dividend yields that are north of the 10-year bond.

This is a theme that you've been discussing for years and years whether it's through cloud computing, ecommerce, artificial intelligence, et cetera. Can you talk to some of the recent things that you've seen or examples of how companies or industries have been transformed because of this digitalization? Patrick Kelly: Sure. We've been repeatedly saying over the past several years that we believe we are in the early days of the one of the most innovative times in history. We've discussed how the pace of innovation has been accelerating. The COVID situation has further accelerated many of the themes that we have been discussing over the past several years such as e- commerce, digital advertising, digital transformation, cloud computing, artificial intelligence. One of the biggest themes that we've highlighted over the past several years is digital transformation. How sectors are digitizing and how companies across sectors need to digitally transform themselves to remain competitive and relevant within their respective industries. It has become table stakes for many companies in many sectors. Virtually every industry is digitizing, from retail to media to financial services, advertising, payments, telehealth, dentistry, education, gambling and even dating has gone digital. Businesses are accelerating the digitization of every aspect of their operation from manufacturing to sales and customer service. Twilio CEO Jeff Lawson suggested that he has seen yearslong digital transformation roadmaps compressed into days and weeks. The company's digital communication strategies were accelerated by an average of six years. ServiceNow CEO Bill McDermott recently said that he has seen CEOs around the world doubling down on their investment in digital transformation. In a pre-COVID world, CEOs recognized that you have to transform but in a post-COVID world you have to be digital to survive. And nine out of 10 CEOs have a digital first strategy yet only four out of those 10 say that they're ready for the digital disruption.

The last time equity dividend yield exceeded Treasury yields, which was at the end of 2008, stocks outperformed bonds by 1,100 basis points annually over the following five years. Goldman Sachs recently issued a report where they indicated stocks have a greater than 90% likelihood of outperforming bonds over the next 10 years, and we feel that equities will continue to look attractive relative to fixed income and money market yields. The path of the coronavirus remains an overhanging risk to the market. We do think that there is risk of cases increasing in the fall as kids return to school, but we continue to be optimistic on a vaccine and expect the news flow to be positive over the next several months. We do expect a COVID vaccine to be widely available in the first half of 2021. Expectations on the timing of a vaccine have improved dramatically over the past three months. Again, we believe equities will continue to look attractive relative to bonds and money market yields especially when we look out for more normalized earnings post a vaccine. The election is also an overhang on the market, but again, we're going to remain positive on equities with a longer term perspective for all of the reasons mentioned. We also continue to believe that high-quality, long- duration growth equities will trade a premium given the low rates and all the disruption that is occurring across sectors and would compare these equities to beachfront property. Jessie Quick : I like that comparison to beachfront properties. One thing that's pressing is COVID-19 and this resulting work-from-home environment that most of the call are probably enjoying today, seems to have accelerated many things, especially the theme of digital transformation.

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Patrick Kelly (continued): This digital transformation theme remains in the early innings. COVID has further accelerated the theme and will serve as a catalyst for accelerated investment going forward, in our opinion. Many of the technology companies and software companies that we own play into this theme.

one that significantly beat expectations and really showed its resilience of its business model as well. So those were two examples of companies that stood out.

Overall I was impressed how companies were able to perform on both the top and bottom line in such a difficult environment.

I would highlight companies such as Microsoft, Salesforce.com and Twilio is companies that are helping companies to digitally transform themselves.

Jessie Quick: Speaking of resiliency, I'm curious after 20 years of investing in growth stocks and over 15 years managing large cap growth portfolios here at Alger, what's the most valuable lesson you've learned? Or mantra that you like to live by or invest by especially through hard times like this year? Patrick Kelly: I feel like I've seen virtually every kind of market since starting in this business over 20 years ago. I would say that the longer I'm in this business the more I believe in our investment philosophy of investing in Positive Dynamic Change. Focusing on change and companies and sectors that we believe are benefitting from change. We are seeing more change today than ever before, so I think our investment philosophy is very applicable to the current environment. I would also say having a relentless focus on process, a relentless focus on constantly improving your process. As many of you may know my favorite book is one written by Bill Walsh and the title of the book is "The Score Will Take Care Itself," which is a very fitting title, and it's all about focusing on having a disciplined process and detailed process to set yourself up for success. I'm a firm believer that you need to have a strong process to be success in any competitive business or sport. Jessie Quick: In your opening remarks, you mentioned the vaccine. I thought you said some interesting things about the timeline coming sooner rather than later. Have you currently positioned the portfolio in anticipation of a vaccine, or have you done any repositioning in thinking about that and the timeline?

You have companies such as Visa and PayPal that are benefitting from payments going digital. Amazon is obviously a big beneficiary of retail digitizing. And Netflix is the digital disruptor in the media sector. The innovation into digitization is creating winners and losers across sectors. We aim to own positions in the companies that are innovating and those that are benefitting from this change. Jessie Quick: With the second quarter earnings season ending, obviously COVID-19 and the pandemic have had an unprecedented impact on many companies and their results. What did you learn from this earning season? And were there any big surprises? Patrick Kelly: Yes, I would say one of the biggest takeaways was the resiliency and adaptability of U.S. companies. And that resiliency was made possible by technology. It would have been a much different story years ago if we were in this situation. But technology has enabled companies to thrive and adapt. Remarkably the percentage of S&P companies beating earnings estimates was 84% in Q2 marking the highest percentage of quarterly beats in at least the last 10 years. The COVID situation has also accelerated a number of secular growth trends, as we just spoke about, and a number of growth companies have benefitted from that. I would say two examples that stand out. One would be Facebook, where it grew their topline over 10% in Q2 despite all the headwinds that it was facing and the advertiser backlash. So I think it really showed the resiliency of its business model. Danaher was another

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Patrick Kelly: Yes. Well, as I mentioned earlier, all of this innovation and digitization of these sectors is creating winners and losers across sectors and we do want to be positioned in the companies that are innovating, the companies that are benefitting from the change and benefitting from the acceleration in these secular growth trends. But we also have been adding some COVID recovery plays in anticipation of a vaccine in the first half of 2021. These are names that we think could rally significantly over the next year if a vaccine is widely distributed, so we have been adding exposure to some of those names. Jessie Quick: My last question, and then I'll turn it over to the audience, is the valuation of growth stocks. Growth stocks have been resilient and have had a strong year, even in the face of all this adversity, so how do you look at valuations, and what is your sell discipline in your process if you find a stock has maybe gotten ahead of itself? Patrick Kelly: We set 1, 3, and 5-year price targets on all of our companies, and we're constantly assessing the risk/reward on all of them. We maintain our own financial models. Our models go out a minimum of five years and in some cases, longer to value our companies. We've always said that one of our favorite valuation metrics is enterprise value to free cash flow. And again, we do monitor the risk/reward, so if we see a stock is approaching our price target, we will trim or sell the name or rotate into another name that has a better risk/reward. I feel like I've been asked this growth versus value question consistently over the past 10 years, and I feel like my answer is consistently been that it's always difficult to predict whether growth or value is going to outperform in the near term, or over the next six months.

growth and value is because of what we've been discussing over the past several years and that we're in the early days in one of most innovative times in history; and this innovation is creating winners and losers across sectors. It's creating significant disruption across sectors, and as I mentioned earlier, the digitization of these sectors is creating winners and losers across sectors. If you look at what's happening to the traditional retail sector that has digitized, there's obviously been a lot of value stocks in the retail space that are now bankrupt. If you look at the media sector, that sector is digitized, and Netflix has disrupted many of the traditional media business models, the traditional media companies have been value stock for years. Many of the auto names are value names, but what is their outlook over the next five to 10 years with the paradigm shift that's going on in auto? The regional banks–what is their outlook? As that sector digitizes, how many of those companies are going to successfully transform their businesses and successfully compete? You can look at energy companies and the outlook for some of these companies over the next five to 10 years as we move to electric vehicles and alternative forms of energy. And as I said earlier, I think there will continue to be a premium paid for high-quality long duration growth assets because there are so many sectors and companies whose business is being disrupted. What's different about the current environment is that there's so many companies out there where the outlook over the next five to 10 years is very uncertain. Looking at some of the larger growth names and looking at their valuations, such as Apple, which is up 5% free cash flow yield on 2021 numbers. They're returning 100 percent of their free cash flow to shareholders

My view is that growth in companies that are innovating will outperform over the long term, and I think the reason that we are seeing such disparity between

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Patrick Kelly (continued): They have a great balance sheet, and that compares to the 10-year yield at 0.5 or 0.6% in money market funds that are yielding virtually zero. Microsoft in our opinion, is one of those high quality, long duration growth assets that trades at 21 times earnings, they should have durable double-digit top line and bottom line–and faster bottom line growth over the next several years. We think the valuation is reasonable given the durable growth profile, and again with rates as low as they are. Facebook trades at 26 times 2021 earnings for a company that will grow at the top and bottom line 15% to 20% over the next several years, and a company that showed the resiliency of their business model by increasing their top-line 10%+ in one of the worst economic quarters we have seen in a long time. And Amazon, which we believe trades at very reasonable multiples if you look out a few years. I think the multiples have expanded on many of these companies. But in a lot of cases, it's justified given their long-term prospects and where rates are. Jessie Quick: Thank you so much for shedding light, especially using the stock examples. Patrick, do you mind answering the valuation question about Google (Alphabet) and your thoughts there please? I almost like to think of Google as almost a staple in some respects because it's something that we use every day. I know I use Google every day. I think if you looked at Google versus many staple valuations, it looks very attractive. I think the valuation is also attractive relative to, again, its growth and where rates are. On an enterprise value to free cash flow basis, Google has a very large net cash position and they generate a significant amount of free cash flow. So Google's valuation is 22 times on Patrick Kelly: I think Google is a very well-positioned company. They dominate their market.

2021 and less than 20 times on 2022 from an enterprise value to free cash flow perspective, which again I think is very reasonable for a company that should be able to grow its top line close to 15% in those years. I think they're also probably the leader in artificial intelligence (AI) and I think that continues to be an emerging theme. We've talked about the AI to be a theme that can be very disruptive and we're just in the first inning. And it's going to be a 50-plus-year theme, in our opinion. I would say that of the tech companies, we do think they are probably most at risk of antitrust regulations because of their dominance in the search market, so that's something that we've tried to balance a little bit with Google. Our position is not quite as high as it has been in the past, as we kind of balance a great company, good fundamentals but a company that we think is at most risk from an antitrust perspective. Speaker Question: Have you guys built a model on Tesla and how in the world can we look at a company like this and try to comprehend how it trades at somewhere at over 700 times earnings? I've heard the argument about it not being an auto company but a tech company. But even this seems extremely ridiculous to me. Can you comment on that and tell me what your models may have said and if you've ever owned it? Patrick Kelly: Yes. We do own a small position in Tesla. Unfortunately it has not been bigger this year, as the stock has obviously appreciated significantly. I think if you build models out over the next five years, there's some companies that are going to provide more certainty than others. We do have a model that goes out five-plus years on Tesla and we do think they will have a significant earnings ramp over the next five-plus years. Jessie Quick: Thank you. I appreciate you being so forward and thoughtful in that response. Let’s take our first question from the audience, please.

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Patrick Kelly (continued): We do think that there's probably a big catalyst ahead in the very near term with Tesla getting added to the S&P 500 index and, just given the market cap of the stock, that's going to create a lot of buying demand for the stock. We've been waiting for that catalyst to happen and then I think we will evaluate whether we want to continue to own the stock or not post the–post that announcement.

impacted by a potential Biden and Democratic victory.

Speaker Question: You've mentioned the digitization of the economy and listed several different sectors where this is occurring. Do you ever get put into a box saying that hey, you're running a technology fund, because this is such a theme throughout all industries? Patrick Kelly: Yes, that's a good question. I think the lines have blurred as to what a tech company is, a consumer company is, what a media company is. We've seen the classifications and the index, they keep changing things around, and some of it makes sense, some of it doesn't. We've been talking over the past several years that almost all companies are having to become technology companies to some extent, and companies are having to invest significantly more in technology. Companies are having to digitize their businesses and so, if you're an auto company, you are facing two big paradigm shifts in electric vehicles and autonomous vehicles. You're having to become much more of a technology company than previously. If you're a retailer, if you look at the income statements of traditional retailers, there was no R&D line, it was just selling, general, and administrative expenses. But now many of these retailers are having to invest in technology and digitize their businesses and the whole idea of selling products to consumers and businesses is changing. We've talked about how the banks have to invest and become technology companies to a certain extent, because there's a shift in the old traditional model of the local bank branch. You used to select a bank based on what bank was in closest proximity to you, and now it's becoming much more about the digital services and the digital asset that the bank provides. And we've highlighted comments that Jamie Dimon has made about the technology investments at JP Morgan and how it's become table stakes and they have a huge technology and IT budget. I think the lines are blurring a bit as to what is and what's not a technology company, and I do think that companies at cross sectors are having to invest in technology, become more like tech companies.

Speaker Question: Did you say you were comparing all equities to beachfront properties or a specific group?

Patrick Kelly: No, I was referring to those that we believe are high-quality growth companies that are good long duration assets. Companies where you have confidence in the outlook in the businesses, where they have good defensible positions, they're benefiting from secular growth trends, and we feel that they're well positioned over the next 5 to 10 years. I think those type of companies are like beachfront properties and I think that they will trade at premium multiples. And part of that is due to all of the disruption that we're seeing across sectors. Also, given where rates are, I think that also enhances the value of these durable assets. The discount rates that you're using on some of these companies are lower now and I think that is another reason that they will get premium multiples. Jessie Quick: Great. Thank you, Patrick. With the U.S. presidential election coming up in a few months, several people are asking how you think that may impact your investment process and how do you see a Biden victory potentially impacting the markets, if that were to happen. So any comments there would be appreciated. Patrick Kelly: There are always risks in the markets, and I think this is one of them. The bigger risk, in my opinion, is if there's a Democratic sweep, if Biden wins and the Democrats take the Senate. Currently, there is slightly more than a 50% chance of that happening. If Biden were to win and the Republicans retain the Senate, that could be viewed as potentially positive for the markets. But under any scenario, I still think that the long-term backdrop for the equity markets remains positive for all of the reasons that I mentioned in my opening remarks. We're going through our portfolio and thinking about how each of the companies will be

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Jessie Quick: Thanks. While we're on this digital transformation and technology theme, I've gotten a few questions about 5G, which is something that you haven't really spoken much about yet. What do you see as an investable option within the 5G landscape and what are you doing to take advantage of it? Patrick Kelly: Yes, I was just having this conversation with an analyst yesterday about 5G. Some is in the beginning stages, so it’s not that material right now, but I think it could be much more material over the next five years. We recently took up our position in T-Mobile, and it's a bit of a life cycle change story with them acquiring Sprint and the 5G assets and network that they have and being able to provide the best network now. I think that's kind of a classic life cycle change story and they may be a big beneficiary of the 5G theme with the combination with Sprint.

And could also be takeouts because we do think that there will continue to be consolidation within the sector.

Sarepta, we think, it's one of the most attractive ways to gain exposure. It has transitioned into the leading neuromuscular gene therapy company with 14 programs in development and potentially three in registration trials in 2020. They've also shown very impressive data for its limb-girdle muscular dystrophy gene therapies and these could represent another $7 billion at potential peak sales, and there's effectively no competition there. And we also think that the deal that they did with Roche a few months ago was very promising, an endorsement of the company. So yes, we think it's one of the more attractive biotech names out there. Jessie Quick: There's a big disconnect between the economy and the stock market and you spoke about that a little bit, but any thoughts on why stocks are trading at such higher PEs or similar PEs as compared to 12 months ago pre-COVID levels? So any quick thoughts there? Patrick Kelly: Yes, that's a great question. I think the market is very forward thinking and I think the market is looking out beyond a vaccine and looking at where earnings can recover to in 2021 and then 2022. I think a lot of people through this COVID situation have either exited the market or reduced some of their positions to some extent; and I think equities look attractive relative to bonds and I think that's why you've seen some of the multiple expansion that you've seen. Jessie Quick: There's obviously been a shift towards growth and more focus on technology, health care, the consumer sector, etcetera–so the question is why Alger? Why your strategies? Patrick Kelly: I would highlight our team, our process, our philosophy. We have a very talented investment team. I think our investment philosophy of investing in Positive Dynamic Change is more applicable today than it ever has been before.

Also, we have owned TCI, the tower company for a while. And they benefit from increased wireless usage, and so they may also be a big beneficiary to 5G.

Yes, it's definitely a theme that we are focused in on, and maybe that's one to talk about in more detail in our next call or podcast.

Speaker Question: Can you comment first on broadly your thoughts on health care and biotech, and then specifically on Sarepta Therapeutics if you still own it?

Patrick Kelly: There’s a tremendous amount of innovation going on in the health care sector as well, and in the biotech space, and the med tech area. There's a tremendous amount of innovation occurring there. We had owned Vertex for a while, and we think that's it's been a good stock, we continue to be positive on it. They dominate the cystic fibrosis market and we think they have a good pipeline. So we do have some exposure to biotech.

We have some exposure to some of the mid cap biotech stocks that we think are developing promising drugs.

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Patrick Kelly (continued): We've been through a lot of different markets–the good, the bad, the worst, some of the best, and through those times we've delivered very strong long-term track records for our clients. Speaker Question: I always wondered what keeps a portfolio manager like yourself up at night? Where do you see the biggest concern that could interrupt this flow of the markets? Patrick Kelly: I think the COVID situation obviously remains a risk and we'll see how cases progress in the fall with people with kids returning to school and so forth. We are optimistic on a vaccine and that news flow over the next several months and having a vaccine widely available in the first half of 2021. Now that doesn't mean everything will go back to 100% normal once we have a vaccine but I think we can take big steps in getting back to normal. But with that said, there's still risk with the vaccines and so it still remains a risk factor out there despite our optimism on the vaccine front.

I think the tensions between the U.S. and China and the risk that that can present.

And as I said too, I think there is some risk to the elections and if there was a Democratic sweep and some agendas that may be pursued but being in this business for the past 20 plus years, there are always risks, there's always stuff keeping you up at night. We're always looking and assessing the risk/reward and yes there are risks out there but we continue to be positive on equities again for all the reasons that I mentioned in my opening comments.

Jessie Quick: Thank you. It was a wonderful call and I hope you have a great rest of the day. Take care.

Patrick Kelly: I want to thank everyone for their time again and all of your support–those were great questions. And again, appreciate the time.

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The views expressed are the views of Fred Alger Management, LLC (“FAM”) and its affiliates as of August 2020. 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 FAM. These views are not meant to provide investment advice and should not be considered a recommendation to purchase or sell securities. Holdings and sector allocations are subject to change. Risk Disclosure: Investing in the stock market involves risks, including the potential loss of principal. Growth stocks may 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. Investments in the Consumer Discretionary Sector may be affected by domestic and international economies, consumer’s disposable income, consumer preferences and social trends. Foreign securities involve special risks including currency fluctuations, inefficient trading, political and economic instability, and increased volatility. Short sales could increase market exposure, magnifying losses and increasing volatility. Leverage increases volatility in both up and down markets and its costs may exceed the returns of borrowed securities. 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. Active trading may increase transaction costs, brokerage commissions, and taxes, which can lower the return on investment . Past performance is not indicative of future performance. 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 authorised 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 an 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 S&P 500 Index is an unmanaged index generally representative of the U.S. stock market without regard to company size. Investors cannot invest directly in any index. Price-to-earnings is the current market price of a company divided by its last 12 months of earnings. Price-to-free cash flow is the current price of a company divided by its last 12 months of free cash flow. The following positions represented the noted percentages of assets as of 6/30/20: Alger Focus Equity Strategy: Amazon.Com, Inc., 9.77%; Microsoft Corporation, 8.98%; Apple Inc., 6.33%; Visa Inc., 4.92%; Facebook, Inc., 4.36%; Danaher Corporation, 4.12%; T-Mobile US, Inc., 3.93%; Alphabet Inc., 3.67%; Paypal Holdings Inc., 3.09%; Salesforce.Com, Inc., 2.88%; Vertex Pharmaceuticals Incorporated, 1.16%; Netflix, Inc., 0.87%; Uber Technologies, Inc., 0.51%; Tower Consultants, Inc., 0%; Roche Holding AG, 0%; and Goldman Sachs Group, Inc., 0%. Alger Capital Appreciation Strategy: Amazon.Com, Inc., 10.09%; Microsoft Corporation, 7.05%; Apple Inc., 6.39%; Visa Inc., 5.91%; Facebook, Inc., 4.47%; Danaher Corporation, 4.20%; T-Mobile US, Inc., 3.80%; Salesforce.Com, Inc., 3.47%; Paypal Holdings Inc., 2.23%; Vertex Pharmaceuticals Incorporated, 1.48%; Alphabet Inc., 1.24%; Netflix, Inc., 1.09%; Twilio, Inc., 0.42%; Servicenow, Inc., 0.29%; Tower Consultants, Inc., 0%; Roche Holding AG, 0%; and Goldman Sachs Group, Inc., 0%. Alger Spectra Strategy: Microsoft Corporation, 9.03%; Amazon.Com, Inc., 7.28%; Apple Inc., 6.35%; Visa Inc., 4.67%; Alphabet Inc., 4.62%; Facebook, Inc., 4.26%; T-Mobile US, Inc., 3.14%; Salesforce.Com, Inc., 2.75%; Paypal Holdings Inc., 2.21%; Vertex Pharmaceuticals Incorporated, 1.67%; Danaher Corporation, 1.64%; Netflix, Inc., 1.30%; Twilio, Inc., 0.90%; Sarepta Therapeutics, Inc., 0.56%; Tesla Inc., 0.33%; Tower Consultants, Inc., 0%; Roche Holding AG, 0%; and Goldman Sachs Group, Inc., 0%.

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