Small and Mid Cap Investing in Volatile Markets


The Alger Weatherbie Specialized Growth strategy was incepted in 1996 and our investment philosophy has not changed. Our investment process, with minor tweaks, also remains the same. Our investment team is intact. We are not reinventing the playbook we have used for 24 years at Weatherbie Capital. Instead we will rely on it in this period as we seek to make our client's portfolios stronger and better. Brad Neuman : All right, great. Thanks so much, Matt and George. Operator, can we open it up to questions from those folks on the line? Speaker Question : The U.S. is looking really strong with all this stimulus being poured into it right now. But we have the resource for that and we see Europe has some of it. But the rest of the world is going to be stuck with coronavirus for a while. How's it going to affect this recession, so to speak, throughout the year? Because I keep hearing about this major snapback and I'm not seeing it. Brad Neuman : We have some templates to look at for this. We were looking a little bit at what's happened in China. And there are also some tentative historical examples, nothing to the extent where the whole economy has been shut down, in the past. But I mentioned one pandemic example from the 1950s. But more recently, China does seem to be getting back to business. Now, obviously, the way China addressed the virus is different than some – than we have in some of the western countries will. But nevertheless, it's probably a little instructive to look at it. Nike reported just the other day and they talked about some significant growth week over week. And actually some of their stores are back to the same levels that they were at before the crisis. We look at a lot of macro indicators and in China that's moving in the right direction. I'd agree with you that for two main reasons, a lot of countries can't respond with the same kind of stimulus that the U.S. did. Number one, they don't have the same governance and strength of a central bank in terms of the history and the preparedness for such an event. And secondly, nobody else has the reserve currency. And to be able to print as much as you want without having a problem and pump that money into the economy, you need to have a very strong or reserve currency. And the U.S. has that.

over the world. We mentioned the European Central Bank, you're seeing even a lot of fiscal stimulus in Europe, which was frowned upon before. So, you are seeing on a global basis. And listen, I think everyone agrees that 3.2 million people just lost their jobs and it's faster to fire those folks than to hire them back. So, the U.S. economy is not going to go back to work in a heartbeat. It's going to take some time. Speaker Question : I had a question about the centerpiece of your portfolio, which seems to me is small to mid-size innovative companies that have been disruptive through their technology and process prowess. I just wondered if, with this disruptive nature of the recession piece here, at least the couple of quarters setback, if those companies will lose a step in their momentum and potentially their enterprise customers will scale back and look to do in-house solutions. I wonder if you have any perspective on that. Matt Weatherbie : We believe that the current challenging economic environment will increase the need for the kinds of innovative solutions that our companies with disruptive technologies, as you call them, provide. So, we think after the initial significant downdraft in the economy created by the coronavirus 19, once the economy begins to stabilize and the business confidence begins to return, we believe our companies are set up to show very strong re- acceleration and growth. George Dai : We do believe that, together with you, the U.S. is probably in a recession and it's probably going to take some time for us to get out of this hole. However, if you look at some of the holdings that we have, now, these are the companies that provides the technology that oftentimes cannot even be duplicated in the previous physical world. I'll just use one example. A company called The Trade Desk, which is one of our top 10 holdings. Now, this is a company that provides programmatic technology platform for the advertisements to be bought and to be sold. And this is the technology leader that significantly not only disrupt the marketplace, but actually accelerates and add value to the end users. So, when we eventually get out of this crisis, this company is going to be positioned in an even better situation in our opinion. The value proposition that this company provides will be even more recognized by its end users. We believe there's just simply no way for companies to go back to the in-house solution. And we have many situations like this.

I'd agree that the U.S. is in a better position than many other countries, but I think you're seeing stimulus all

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