Source: www.barrons.com. The following has been excerpted:
One needs a cool head to invest in the hottest growth sectors. Expectations and valuations for rapidly growing companies are high, and if a company misses the mark, stock selloffs can be severe. Not overreacting on the way up—or down—is essential for investors.
Jason White, 47, knows how to handle volatile situations. Before becoming lead manager of Artisan Global Discovery, he was in the Navy for five years, from 1995 to 2000. He served as a Fire Control Officer managing the weapons on destroyers patrolling the Persian Gulf and the South American coast.
Now, White seeks midsize growth companies throughout the world that have the earnings potential of smaller companies, but the business resilience of larger ones. That balance of risk and reward enables him to avoid the worst blowups.
While White was in the Navy, he was also studying to take his chartered financial analyst, or CFA, exam. He had no background in finance, but both he and James Hamel—who co-founded the Artisan Partners Growth team in Milwaukee in 1997 — grew up in the same small city of Wisconsin Rapids. White was friends with Hamel’s younger brother and had always looked up to “Jim,” who encouraged his interest in investing.
Hamel hired White as a tech analyst in 2000, and by 2011 he was an associate portfolio manager of three other Artisan growth-oriented strategies. Global Discovery, which launched in 2017, has four other co-managers, including Hamel, but White, as lead, has final say on its portfolio. Mid-caps are a favorite hunting ground for the growth team. “We’ve always thought of mid-cap companies as an intersection of quality and growth, where we could find businesses that have real competitive advantages and great management teams,” White says. “They’re really established, but they still have a nice runway of growth in front of them.”
The team gradually expanded into covering companies overseas, first launching Artisan Global Opportunities, which focuses on larger, easier-to-research stocks, in 2008. But each of the strategy's 12 sector analysts now has more than 10 years of experience covering the globe, White says.
As a growth-stock strategy, technology stocks play a significant role. Going into 2020, he was trimming his holdings of many software names as prices looked stretched, but started buying them back once the market crashed that March.
The pandemic spurred him to add some new tech names to the strategy as well. One was Zscaler (ZS), a cloud-based security service company. With IT security, historically companies had “inertia about the old way of doing things,” White says. “But the pandemic was actually a catalyst, as people have to work remotely.”
Having cloud-based security systems is advantageous when employees work remotely. Zscaler offers businesses a Zero Trust Network Access, giving remote users seamless, secure connectivity to private applications without ever placing them on a company’s internal network and exposing it to hackers on the internet.
While White has held such cloud-based software companies as Veeva Systems (VEEV) since the strategy’s inception, the tech rally off the market’s March 2020 bottom was so strong, he has been searching for cheaper growth opportunities.
One recent addition in the third quarter of 2021 was Finnish mining-equipment company Metso Outotec, the product of a 2020 merger between Metso Minerals and Outotec. In White’s view, the company has three avenues for growth: cost efficiencies from consolidation under its new postmerger management team, a focus on sustainable mining equipment as environmental regulation increases, and a growing demand for copper, lithium, and other metals for electric vehicles. That electrification trend should be a long-term growth driver for mining, which most investors have historically viewed as a cyclical industry, he notes.
White has also been adding to healthcare stocks. He first purchased Gerresheimer, a German pharmaceutical packaging company, in the third quarter of 2020.
“You don’t think of pharmaceutical packaging as a growth industry generally,” White says. “But this is another one where a new management team came in, and that caused us to look at it.”
The company has recently focused on high-resistance glass vials, autoinjector pens, and inhalers for the rapidly growing market for biologics—drugs made from biological sources, such as vaccines and gene-therapy treatments. White expects annual revenue growth to increase with this new focus from 2% to 3% to upward of 10% in the next three years.
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