MiB: Generating Performance via Concentrated Growth
What if your investing process was to find attractive companies to buy, regardless of style, size, or location? Once you have identified which of these companies have the greatest growth potential, figuring out the best home for it is almost secondary. Surprisingly, this is the opposite philosophy of how most mutual funds operate. Most have preordained and well-defined parameters that limit what they can buy.
Dennis Lynch, Head of Counterpoint Global at Morgan Stanley Investment Management, has embraced that less common process. Counterpoint Global is a “firm within a firm at Morgan Stanley, managing about $130 billion.
Several of the funds Lynch and his team manages — Inception, Discovery, Growth, Insight, Advantage & Permanence — have doubled YTD in 2020. Their long-term track record has been similarly outstanding.
Lynch describes the group’s process as somewhat unusual: Their 19 products are concentrated globally in just 200 companies. He explains how they have used personality tests to shed insight into how one’s personality type might impact their stock-picking and decision-making.
He observes that the relative momentum of tech stocks during the 34% drop in February and March 2020 was strong, and quickly translated into absolute strength as the market began to rally. He does not expect the torrid pace of growth to continue indefinitely. While remaining long-term bullish on technology and growth names, he warns that investors might want to ratchet back future expectations. Assuming the economy will be substantially larger in 2022 than it has been during the pandemic and lockdown, much of that growth is already reflected in current asset prices.
You can stream and download our full conversation, including the podcast extras on iTunes, Spotify, Stitcher, Google, Bloomberg, and Acast. All of our earlier podcasts on your favorite pod hosts can be found here.
Be sure to check out our Masters in Business next week with Greg Fleming, founding CEO of Rockefeller Capital Management based on the prior Rockefeller Family Office. They have about $43 billion in AUM. Previously, Fleming was President of Morgan Stanley Wealth Management and served as Chief Operating Officer of Merrill Lynch, where he ran Merrill’s Global Investment Banking business.