Portfolio Insights: Small Cap Focus & Mid Cap Focus

TRANSCRIPT

The types of companies that Amy invests in, and frankly that are proliferating more and more in the economy, are investing much more in intangible assets like research and development into software, algorithms, and drugs; and advertising into branding and investing in human resources. Those kinds of spending and assets aren't reflected in book value. And so because price book value is not a good measure anymore, value stocks tend to be the stocks that are just less innovative rather than out of favor. Growth stocks are companies that are more innovative and over the past decade those companies that are more innovative with higher R&D as a percent of sales have dramatically outperformed that those companies that are less innovative and we believe that trend will continue over the next several years. Speaker Question : Is there anything in the last week or two or even today that is just so head scratching, jaw- dropping cheap that just did not make any sense to you? As specific a name as you can get to, but is there anything that even today is disassociated from reality? Amy Zhang : Oil being negative, that's very jaw- dropping. I think that will be a temporary scenario. I think I will consider that one of the black swans, although we have had several black swan events this year. From a portfolio perspective, we have companies that we believe will continue to do well, weather the storm, and are doing relatively better than their peers or competitors. But also, we are looking at companies that are at “stupid prices.” I talk to my team, we stress test all of the portfolio, and rank it in terms of risk and reward. I'm actually very excited in terms of stock selection, in terms of potentially upgrading the portfolio both in weighting and also names. I think this is a great opportunity because you’re going to have those extreme scenarios so we take advantage of the volatility. Speaker Question : Are there any names that have graduated? Are there any names that you wish you could still own but have grown to be too big? Either from

small to mid or mid to outside of mid that you just were forced to get out of because they grew to be too big and you wish you could still own?

Amy Zhang : I don't have any of that, but because I'm not forced to. This is still a small cap strategy, but it's I could have one exception, sometimes one or two. For example, we own Shopify, which is large cap. It’s my exposure for e-commerce. Do I wish I could own it as a huge position? No. It’s a smaller position. But it was a top 10 holding for a long time, until last year. Eventually, it will probably not be in the fund anymore, but I’m glad that it is for now because we do like to let our winners run. I think that's a key advantage in terms of what we do. But we also have very emerging sort of growth companies that we own like Everbridge or Avalara. So, it's really barbell. The companies that you see in our portfolio that are not small cap: there are only a few of them and they really serve a purpose. It's all about long- term for me. Brad Newman : I want to thank everybody on the phone for a fantastic turnout and spending your time with us today. I want you to know that we really value our relationship with you and we're here for you during these extraordinary times.

Amy Zhang : Thank you. I really appreciate all your support. Have a great day.