Growth opportunities – tremendous potential
Recent economic events, including the wholesale changes wrought by the COVID-19 pandemic, have thrown a spotlight on how Lettenberger and his colleagues navigate an ever-changing stock market.
After a banner year in the market, like 2020, some fund managers pivot to value stocks, but Lettenberger tries to maintain a consistent focus on growth stocks regardless of the market cycle. However, the Fund may opportunistically stretch its allocation in sectors that the team considers undervalued.
For instance, when the manufacturing sector suffered setbacks in the early months of the pandemic – as supply and distribution channels were disrupted – the Fund shifted its weighting in that sector from underweight to overweight, with particular emphasis on cyclical companies that tend to do well when spending revives.
“Importantly, even investments made in these more cyclical industries are focused on companies that are growing relatively faster than their peers,” noted Lettenberger.
Although the Fund is not a technology fund, it does invest heavily in that sector – and in industries that are affected by evolving technology. “Innovation happens everywhere,” Lettenberger explained. “It’s not just isolated to technology and healthcare. It’s happening in the financial sector. It’s happening in the industrials.”
The following examples of positions in the portfolio, as of Oct. 31, 2021, show the different areas innovation is taking place. Middleby, a manufacturer of commercial and industrial food preparation equipment and residential appliances; Five9, a provider of cloud contact center software; Inspire Medical Systems, a developer of sleep apnea treatment products; and Natera, a leader in DNA testing and women’s health.
“I think small cap growth stocks have tremendous potential going forward, led by innovation that is impacting all industries” said Lettenberger.
But to take advantage of that potential, it’s important to stay focused on changes in technology and market dynamics. “When things change,” said Lettenberger, “you need to put your learning hat back on and figure out how you can benefit from that change.”