Portfolio Insights: Small Cap Focus & Mid Cap Focus


Speaker Que stion: I wanted to know if you would care to comment about oil and also the slowdown of the U.S. consumer and how that might position your stock selection and your sector selection? Amy Zhang : Well, I don't invest in energy. As you know, oil is really very macro. And in terms of demand, the geopolitical situation plays an extremely important role as well. But consumers are important, on the other hand especially because the U.S. consumer is two thirds of the economy. I think we are well positioned because we have very low leverage in this portfolio. For consumers you want to have lower gas prices. So in a way, it is positive, but again, everything is about magnitude and extreme. We wouldn't want it if the economy is in a deep recession, that everything clearly will affect consumers. We position our consumer portfolio extremely selectively. For example, a long term holding is Wingstop. Their franchisees have done very well, we’ve done a lot of channel checks because we initially were nervous. But then after we talked to their franchisees, we felt much better about it. They're doing positive and they pre-announced very strong results, which is very exceptional. And they also do digital and delivery and which will be the new trends I believe, so I think they will be well positioned for the future. Also personally, I always believe my guiding principle and invest in consumer is that you want it to give consumers good bang for the buck. Lower cost items are better for the masses and offer a strong value proposition. Brad Newman : Obviously, we saw the oil price on the near-term contract go negative. And that was because investors and companies who were long that contract didn't have anywhere to store the oil so they would actually pay to sell it, which was a very unusual occurrence, but it was because the storage tanks around in the US and even mostly around the world are generally full. Obviously demand is down significantly. Somewhere from maybe 100 million barrels per day to something like 70 or 75 million per day. And so there's just not enough demand to sop up the supply and won't be until there's either much more major supply

constraints or we start getting back to work in terms of production around the world. And 40% of oil demand is car and truck related so we need to get back on the roads as well. And until that time, oil will probably be in an oversupply situation.

Speaker Question : Quick question for you, across all your styles, about how much in the assets are you managing right now?

Amy Zhang : Yes. So currently we are managing about $4 billion in Alger Small Cap Focus strategy. And, as you may recall, we selectively soft closed, some channels are open while existing clients and certain selected channels. And the Alger Mid Cap Focus strategy is approximately $46 million, which is up from several million last June. Speaker Question : Can you speak at all on the valuation of the current portfolio today relative to historic levels and where you see it going? Amy Zhang : We do look at historical levels of our valuation metrics because in our view valuation is a range, especially for a small company. We use a lot of different methodologies, and we run a lot of different valuation metrics and some back of envelope calculations too. We should get a reasonable range because if there's discrepancies we must question our assumptions. A lot of companies, especially for small growth companies, have changed a lot. For example, we look at how they did in 2008. Some companies you can go back to 2002 because we do have companies that have more than 10 or even 20 years’ operating history. Speaker Question : From a historic standpoint you've seen a lot of money go into technology in the healthcare areas. How do you see valuation today?

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