Portfolio Manager Eric Schoenstein joins the Money Life podcast with Chuck Jaffe to discuss using quality as a factor in selecting growth stocks.
From the podcast:
CHUCK JAFFE:
In this market where we’ve seen a lot of froth, we’ve seen very narrow leadership, how much do you have to look at those leaders to participate? How much are you willing to say, I’ll be on the outs?
ERIC SCHOENSTEIN:
I think you nailed it as far as what’s happened. The first seven months of this year in 2023 have been all about, I guess the most common term is, “the magnificent seven.” A lot of momentum, a lot of top line growth, a lot of future expectations for growth.
To be honest, we own three of them. We own Microsoft, we own Apple, we own Alphabet. And we don’t own the other four: Tesla, Amazon, Meta and Nvidia. Not necessarily because we’ve made a determination that they don’t work for us. It’s actually that they don’t qualify for our discipline yet. In other words, they haven’t generated that 10-year standard of excellence that we like to start with as a foundation.
That doesn’t mean they’re bad companies, it just means until they get to that level of excellence, they’re not yet qualified for us. And our universe that we look at is about 320 names, so it’s robust enough to give us the opportunity to get down to 25 to 30. If and when any of those businesses qualify for our discipline, we’ll be happy to take a look at them and [see if] they are more viable opportunities.
But I think this year, because of how concentrated everything has been, certainly, it’s left a lot of businesses on the sidelines that frankly aren’t, we think, well positioned. And as things are slowing or feel like they’re slowing right now, this might be the time to start thinking a bit more about those businesses that are not part of the magnificent seven.
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Fund holdings are subject to change at any time and are not recommendations to buy or sell any security. Current and future portfolio holdings are subject to risk. View the Jensen Quality Growth Fund’s current holdings here.
Mutual fund investing involves risk, and principal loss is possible. The Fund is non-diversified, meaning that it may concentrate its assets in fewer individual holdings than a diversified fund, and is therefore more exposed to individual stock volatility than a diversified fund. The prices of growth stocks may be sensitive to changes in current or expected earnings, may experience larger price swings and may be out of favor with investors at different periods of time.
Opinions expressed are those of Jensen Investment Management and are subject to change, not guaranteed and should not be considered investment advice.
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