Small-Stock Managers Still Top the Charts
as the shares approached $100, but has now started to repurchase them as the price has fallen again. The company is changing its legal name to WW Inter- national Inc. as it emphasizes “healthy eating,” not just dieting, and—crucial to Mr. Ely—has shifted its business to a mobile platform, helping clients and employees connect online. “Its market is now global.” He expects that Take-Two Interac- tive Software Inc. will continue to be a big winner, based on the same theme of individuals changing the way they interact and opting to connect online. In this case, those people are gamers, and Mr. Ely says he doesn’t want to under- estimate the addictive value of games created by highly educated software engineers. We’re consuming health care in a different way, and Mr. Ely thinks companies like BioTelemetry Inc., whose stock has more than doubled
over the past 12 months, will continue to grow along with the use of its mobile cardiac-monitoring devices. He’s also taking stakes in cannabis companies: Canopy Growth Corp. of Canada (Mr. Ely says he was encouraged by a $4 billion investment made by drinks company Constellation Brands Inc. this summer) and GW Pharmaceuticals, the first cannabis company to have one of its medical products approved by the Food and Drug Administration for even limited uses. “These all are companies that have dramatic growth potential, that are leaders—and mostly that remain chron- ically undervalued,”Mr. Ely says. Ms. Zhang seeks to identify compa- nies with a large competitive moat and the potential to see their revenue growth double over the next three to five years. She has found interesting candidates in health care, including Veeva Systems,
a cloud-computing business delivering solutions to pharmaceutical and life- sciences companies. “People didn’t believe that they could grow as fast as they have; that [customer relationship management] was going sideways,” she says. Veeva has rolled out a series of successful products, has more on the way and is starting to move beyond life sciences, she notes. “They have no debt, high-quality revenues and high margins.” While there are justifiable doubts about the worth of active management, Ms. Zhang says she likes her fund’s chances as she continues to pit her stock-picking skills against small-cap index funds. “The small-cap world is a very fertile one for active manage- ment,” she says. Ms. McGee is awriter in NewEngland.
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