Speaker 1: Welcome to Inside Active, a podcast about active managers that
Speaker 1: goes beyond sound bites and headlines and looks deeper into
Speaker 1: their processes, challenges and philosophies and security selection. I'm David Cohne,
Speaker 1: I lead Mutual fun and Active Research at Bloomberg Intelligence.
Speaker 1: Today my co host is Gina Martin Adams, chief equity
Speaker 1: strategist at Bloomberg Intelligence. Gina, thank you for joining me.
Speaker 2: Thank you for having me David.
Speaker 1: So, before we bring today's guest in, I wanted to
Speaker 1: ask you. You held your US Equity Outlook breakfast last
Speaker 1: week you talked about a perfect storm happening. Can you
Speaker 1: tell us about this perfect storm?
Speaker 2: Yeah? So, the perfect storm is really a combination of
Speaker 2: seasonals with a fundamental rotation with some economic surprises. Unfortunately,
Speaker 2: coming into the third quarter was pretty clear that we
Speaker 2: were due for some rotation as fundamental earnings growth desceleration
Speaker 2: in some of the tech and AI themes really take
Speaker 2: some of the wind out of the sales of the market.
Speaker 2: But some other fundamental improvements in early cyclicals and other
Speaker 2: industries make up for some of that loss. But that
Speaker 2: rotation can be pretty tough for the market at large.
Speaker 2: When tech was such a big portion of especially the
Speaker 2: US market, but also global equity performance over the course
Speaker 2: of the year. At the same time, you have very
Speaker 2: traditionally poor performance that emerges in the third quarter. September
Speaker 2: is the worst month of the year historically, so you've
Speaker 2: got the technicals that are working against the market. And
Speaker 2: then thirdly, some pretty big surprises on the economic front,
Speaker 2: in particular with respect to policy. Coming into July. You know,
Speaker 2: the bond market was somewhat complacent with respect to where
Speaker 2: we were heading for FED policy, and now all of
Speaker 2: a sudden, we're expecting one hundred and fifty bases points
Speaker 2: of cuts over the next twelve months. So those three
Speaker 2: factors have created a little bit of volatility in the
Speaker 2: equity market, to say the least. And I'm really excited
Speaker 2: to speak to our guest about those well.
Speaker 1: It sounds like a lot going on, and so with that,
Speaker 1: I'd like to welcome Felise Agronov to the podcast. Falise
Speaker 1: is a portfolio manager at JP Morgan Asset Management. She's
Speaker 1: co PM on the JP Morgan Active Growth ETF, which
Speaker 1: as a ticker of jg R ROW, and lead manager
Speaker 1: on the JP Morgan Growth Advantage Fund. Which has a
Speaker 1: ticker VHIAX Falise. Thank you so much for joining.
Speaker 3: Us, Thank you so much for having me.
Speaker 1: So before we dig in, i'd love to hear how
Speaker 1: you got your start in the investment business.
Speaker 3: Yeah, so it's a long story, but I was born
Speaker 3: and raised a JP Morgan. I'm just kidding, but I
Speaker 3: started at JP Morgan twenty years ago. When I first
Speaker 3: started at JP Morgan, I started as a research associate
Speaker 3: of covering cyclical sectors on our core research team. I
Speaker 3: joined the Growth team eighteen years ago and I started
Speaker 3: as a research analyst covering a variety of different sectors.
Speaker 3: I started at a time when our growth team was
Speaker 3: actually quite small relative to where it is today, and
Speaker 3: so I always wore a lot of hats and had
Speaker 3: a broader interest in the portfolio is of the sectors
Speaker 3: that I covered, and so as a result, I was
Speaker 3: named co portfolio manager ten years ago, first of our
Speaker 3: mid cap growth fund, and eventually that's also translated into
Speaker 3: the Growth Advantage fund that you mentioned as well as Jaygrow.
Speaker 3: As you mentioned as well, I'm also a portfolio manager
Speaker 3: on our equity focused strategy as well.
Speaker 1: Nice, so you know both. You know, I mentioned jaygro
Speaker 1: and you just mentioned it, and you know, so my
Speaker 1: first question really has to do with Active regaining relevance
Speaker 1: right now, especially in etf rappers. So I'd love to
Speaker 1: hear more about Jaygrow and you know the process for
Speaker 1: the fund.
Speaker 3: Yeah, No, happy to do that. And I think it
Speaker 3: is a really really interesting moment in time after leadership
Speaker 3: has been very narrow in the markets is you know
Speaker 3: alluded to earlier, and our growth benchmarks are concentrated as
Speaker 3: I've ever been And essentially, you know what Jaegro is.
Speaker 3: Jagro is an active growth ETF. It's a combination of
Speaker 3: the growth advantage strategy that I manage as well as
Speaker 3: my all Gary Devipoli's large cap growth strategy. We package
Speaker 3: those two long standing strategies with strong historical track records
Speaker 3: together in an active ETF, which we launched over two
Speaker 3: years ago now is fifty to fifty between large cap
Speaker 3: growth and growth advantage, and it's benchmarked against the Russell
Speaker 3: one thousand growth. Essentially, what you get with Jagro is
Speaker 3: you get the best ideas of the entire growth team
Speaker 3: wrapped in an ETF rapper, fully transparent, with a fee
Speaker 3: of forty four basis points, and then I'm happy to
Speaker 3: get into a little bit more into the philosophy and
Speaker 3: the processes. That's helpful as well.
Speaker 2: Great, thank you. I'm curious, Pelise if you could tell
Speaker 2: us a little bit more about your migration through your career.
Speaker 2: I really piqued my interest when you said you started out,
Speaker 2: or at least prior to the last the most recent experience,
Speaker 2: you were in mid caps, and I'm curious about your
Speaker 2: perspective the difference between managing a mid cap fund and
Speaker 2: a large cap fund and how vastly different those experiences
Speaker 2: have been, or maybe some commonalities in the two processes.
Speaker 3: Yeah, no, happy to touch on that. And actually I'm
Speaker 3: still the lead portfolio manager today. I have our mad
Speaker 3: cap growth strategy as well, and essentially what our growth
Speaker 3: advantage strategy is is it is a multicap strategy which
Speaker 3: leverages our best ideas across the market cap spectrum. So
Speaker 3: it includes our best ideas on the large cap side
Speaker 3: as well as our best ideas on the mid cap side.
Speaker 3: And I would say that our philosophy and process is
Speaker 3: actually quite similar between the two, and that might be
Speaker 3: a good good point for me to just talk a
Speaker 3: little bit about our philosophy and process, and then we
Speaker 3: can talk about some of the nuanced differences between made
Speaker 3: and large cap.
Speaker 2: If that works, yeah, please go right ahead.
Speaker 3: Okay, that's great. And so essentially what we're looking for
Speaker 3: is we look for high quality growth companies, and from
Speaker 3: our standpoint, from a quality perspective, we're focused on companies
Speaker 3: with strong and sustainable competitive advantages. We do a ton
Speaker 3: of due diligence on a company's competitive mode. We also
Speaker 3: look for companies with best in class management teams, and
Speaker 3: then we look for growth companies with strong financial characteristics.
Speaker 3: In growth, you don't necessarily need to be maximizing your
Speaker 3: margins and free cashow today, but you ultimately need to
Speaker 3: have a really attractive financial model. And then we combine
Speaker 3: the quality side of our philosophy with growth, where we're
Speaker 3: looking for large, underappreciated growth opportunities where we can get
Speaker 3: a differentiated perspective. And that differentiated perspective is key, and
Speaker 3: we should talk more about it because we believe the
Speaker 3: real money way to make money and growth companies is
Speaker 3: to have a very different view on a company's longer
Speaker 3: term earnings power relative to other market participants, and that
Speaker 3: tends to be where we really really win, and we
Speaker 3: do that through deep due diligence. At chap and Morgan,
Speaker 3: we have incredible access to management teams, and we go
Speaker 3: and we visit companies on site on a regular basis.
Speaker 3: For example, within technology, twice a year we're out in
Speaker 3: Silicon Valley meeting with both public and private companies. But
Speaker 3: we also take our research a step further. We are
Speaker 3: our industry analysts have decades of experience covering their sectors
Speaker 3: and they're out there speaking with industry contacts, customers, competitors, suppliers,
Speaker 3: attending trade shows, and that really guides our differentiated perspective
Speaker 3: on these large growth opportunities. And we generally feel that
Speaker 3: the market often underappreciation rewards both the magnitude and duration
Speaker 3: of high quality growth companies. And then as it relates
Speaker 3: just to the difference between mid and large caps, we're
Speaker 3: in a world where we love to get a differentiated
Speaker 3: perspective and we like to find companies as early as possible.
Speaker 3: And so what I would say is sometimes the markets
Speaker 3: tend to be less efficient as you go down the
Speaker 3: market cap spectrum, and so there's even more of a
Speaker 3: chance of being able to get a very very different
Speaker 3: perspective relative to other market participants to the deep due
Speaker 3: diligence that we do. So I think that that's been
Speaker 3: a really important part of our process. And one of
Speaker 3: the things that we love to do in growth Advantage
Speaker 3: in j GROW is we like to own companies really
Speaker 3: really early from when they're a MidCap company and then
Speaker 3: own them so they become much larger companies. And there's
Speaker 3: many examples within the portfolios of companies like this that
Speaker 3: we've owned when there were smaller medcap companies and then
Speaker 3: became much larger.
Speaker 2: Do you find yourself in today's climate, just because of
Speaker 2: concentration and because of the AI phenomenon, spending much more
Speaker 2: time in the biggest of the big caps relative to
Speaker 2: the smaller caps.
Speaker 3: Yeah. So the reality is that since our benchmarks as
Speaker 3: concentrats has ever been, it's become extraordinarily important to have
Speaker 3: the right view on all the largest cap companies, and
Speaker 3: so relative to history, the larger cap companies are definitely
Speaker 3: taking more mind share, they're definitely taking a larger percentage
Speaker 3: of the portfolio. However, we are active managers, so we're
Speaker 3: not afraid to be different than the benchmark. In fact,
Speaker 3: as you look at it today. If you look at Jagro,
Speaker 3: we're over a thousand basis points underweight the Magnificent seven.
Speaker 3: And so we actually think that, you know, after leadership
Speaker 3: has been extraordinarily narrow, our view is that what we're
Speaker 3: going to see is we're going to see leadership broad now.
Speaker 3: We're going to see more differentiation between companies, whether it's
Speaker 3: the largest cap companies or across the market cap spectrum.
Speaker 3: And to us, that's providing a really attractive opportunity for
Speaker 3: us as stock pickers.
Speaker 2: And then last question, then I'll let David possibly have
Speaker 2: a word in edgewise here. I'm curious because one of
Speaker 2: the complaints I hear oftentimes from investors is that there
Speaker 2: just are a dearth of opportunities in small and mid caps,
Speaker 2: in particular because there's been very little issuance, especially into
Speaker 2: the small cap index, but very little activity in the
Speaker 2: mid cap index. Are seeing, you know, companies go from
Speaker 2: small directly into large and large directly into small. Talk
Speaker 2: to us about some of the opportunities that you've engaged in,
Speaker 2: or maybe some of the ideas that you're generating that
Speaker 2: are more mid cap and focus right now.
Speaker 3: Yeah, No, it's a really really good question. One of
Speaker 3: the things that I would say is is that you
Speaker 3: lack of IPOs has definitely impacted small caps. And so
Speaker 3: you may have noticed when I talked about opportunities we're
Speaker 3: finding down the market cap spectrum, they tend to be
Speaker 3: more mid caps today rather than small caps, as the
Speaker 3: quality of the company and small cap is low, I
Speaker 3: would say relative to history. However, I think that there
Speaker 3: are a lot of interesting companies that have graduated into
Speaker 3: the MidCap universe that are really, really interesting. One of
Speaker 3: the things that we love about MidCap companies is that
Speaker 3: by the time they graduate, they tend to be of
Speaker 3: a certain quality to make their way out of small cap,
Speaker 3: because many companies never make their way out a small
Speaker 3: cap and often they could have the ingredients to become
Speaker 3: much much larger companies over time. And so I'm happy
Speaker 3: to give you a few examples. I mean, one great
Speaker 3: example of a company that we have owned in our
Speaker 3: MidCap strategy for a long while and we now also
Speaker 3: own in Jagrow, would be paloout On Networks. Palleout On
Speaker 3: Networks is a leader in cybersecurity hardware and software. They
Speaker 3: have a really really strong competitive position and they're consolidating
Speaker 3: market share within cybersecurity as security becomes a really really
Speaker 3: high priority part of the tech budget, even if I'm
Speaker 3: sure you're going to talk about generative AI, but when
Speaker 3: you think about the risks around generative AI and moving
Speaker 3: data into large language models, the cybersecurity risks have never
Speaker 3: been higher. And so as a result, we're seeing companies
Speaker 3: prioritize within their tech budget spending on cybersecurity, and a
Speaker 3: company like Palato is able to consolidate market share as
Speaker 3: big companies like JP Morgan, we don't want to deal
Speaker 3: with multiple vendors. Instead, we want to consolidate or spend
Speaker 3: with less and less vendors. And so a company like
Speaker 3: Palota Networks that's gone for being a much smaller company
Speaker 3: to being a much larger company as the importance of
Speaker 3: the platform has really helped them perform and execute well
Speaker 3: in the market.
Speaker 1: I actually have a follow up question to you. Know,
Speaker 1: you mentioned J grow leverages large cap growth and growth advantage. Yeah,
Speaker 1: I guess what is the process? Is it just kind
Speaker 1: of taking different securities from each portfolio or is there
Speaker 1: you know, kind of a process of how that works.
Speaker 3: Yeah, No, I'm glad you asked that question. And so
Speaker 3: the way it works is it is just a combination
Speaker 3: of straight combination of large kept growth strategy that's existed
Speaker 3: for a long time as well as a growth advantage strategy.
Speaker 3: And so we're not doing anything different in the Jagro vehicle. Essentially,
Speaker 3: what we're doing is we're just taking half of one
Speaker 3: portfolio and half of another portfolio and putting them together
Speaker 3: into this vehicle. And so if the name is a
Speaker 3: high conviction name both in growth advantage and large kept growth,
Speaker 3: then it becomes one of the biggest bets within ja grow.
Speaker 3: So a good example of that would be Regeneron, for example,
Speaker 3: within healthcare, is a very large bet within jagrow. If
Speaker 3: it's a smaller bet and just one of the strategies,
Speaker 3: and it ends up being a really small bet within Jagrow.
Speaker 3: And so that's why I mentioned that it really represents
Speaker 3: the best highest conviction thinking of the entire growth platform
Speaker 3: at JPMorgan.
Speaker 1: So I actually have one more question on process. In
Speaker 1: the perspectus for the fund, it does mention that this,
Speaker 1: you know, an ESG component involved, and I guess my
Speaker 1: question is, you know, what is the process for that?
Speaker 3: Yeah, And so we've you know, We've had a long
Speaker 3: standing process around ESG where we fill out I'M a
Speaker 3: proprietary questionnaire that focuses on what we believe are the
Speaker 3: key es and G issues, and every analyst fills that
Speaker 3: out with the companies that they cover, and when we're
Speaker 3: incorporating a company into the portfolio, we think about the
Speaker 3: ESG risks. Now, we don't focus specifically on ESG as
Speaker 3: the only risk, but we look at one of the
Speaker 3: many risk factors that we look at when we're thinking
Speaker 3: about position sizing.
Speaker 2: Speaking of risks, I would be remiss if I didn't
Speaker 2: mention the macro risk that we talked about at the beginning.
Speaker 2: Maybe you could talk to us a little bit about
Speaker 2: how you navigate through these pretty big shifts, especially in
Speaker 2: monetary policy. I think it's pretty clear that the market's
Speaker 2: really struggled a little bit with this idea that suddenly
Speaker 2: the FED is going to ease and potentially ease a
Speaker 2: little bit more than anybody had anticipated. At the same time,
Speaker 2: the BOJ is hiking tech and growth stocks seem to
Speaker 2: be at the sort of center of that risk right now.
Speaker 2: How does that play into your process if at all?
Speaker 3: Yeah, No, it's a good question. And I think risk
Speaker 3: is a really important question to explore for us because
Speaker 3: we do have a keen focus on risk management. So
Speaker 3: I want to explore that more broadly but directly related
Speaker 3: to your question around macro risks. And we very much
Speaker 3: are bottoms up stock pickers. However, we're very aware of
Speaker 3: the market environment that we participate in as well as
Speaker 3: many of the macro drivers and what we're not. As
Speaker 3: much as we are high quality growth investors, we're not
Speaker 3: growth at any price. And so the key for us
Speaker 3: is when we're able to find a very differentiated perspective
Speaker 3: relative to the market. And so, for example, there are
Speaker 3: points in time, say in twenty twenty in twenty twenty one,
Speaker 3: which is a very different period than we're in today,
Speaker 3: when interest rates were very very low, we were coming
Speaker 3: out of COVID, where what we saw was is that
Speaker 3: many of the highest growth parts of our universe, such
Speaker 3: as technology, they were very very extreme valuations relative to history.
Speaker 3: And even though many of the same software companies had
Speaker 3: driven very substantial performance for us for many years. We
Speaker 3: really pride ourselves in being really really objective and focusing
Speaker 3: on where we can get a differentiated perspective and what
Speaker 3: we were finding was that we didn't have as great
Speaker 3: of a differentiated perspective on many of those tech companies
Speaker 3: at that moment in time, given the valuation starting point.
Speaker 3: And so at that moment, we pivoted based on the
Speaker 3: bottoms up riscrew boards that we were seeing, and we
Speaker 3: actually went very very underweight technology. At one point, we
Speaker 3: were about one thousand basis points underweight technology relative to
Speaker 3: a high weighting in the benchmark. I give you that
Speaker 3: background just to show that we're willing to come pivot
Speaker 3: based on the environment that we're in, and we really
Speaker 3: do let the bottoms up riscrew boards that we're finding
Speaker 3: guide it. But it's actually interesting to note. I did
Speaker 3: mention that we are very very underweight the Magnificent seven
Speaker 3: today based on what we're seeing from a risk reward
Speaker 3: standpoint and how differentiated our views are. But when you
Speaker 3: look at technology as a whole, we're also very very underweight.
Speaker 3: We're over eight hundred basis points underweight technology relative to
Speaker 3: a very very concentrated benchmark, and so we are seeing,
Speaker 3: you know, some increased risks, I would say, and on
Speaker 3: the margin, I think we're looking for more portfolio balance
Speaker 3: relative to a very very concentrated benchmark that includes, you know,
Speaker 3: investing in a variety of different sectors. We've gone increasingly
Speaker 3: overweight healthcare, for example, which is a more defensive sector
Speaker 3: and provides more portfolio balance. But then we've also found
Speaker 3: interesting opportunities in sectors such as financials that have been
Speaker 3: out of favor for a long time, while you know,
Speaker 3: areas like tech have been in vogue. And so we're
Speaker 3: definitely very much focused on portfolio balance and we don't
Speaker 3: want to let you know, the macro environment you know,
Speaker 3: overall drive the portfolio. We really want to let our
Speaker 3: focus on stockpicking.
Speaker 2: Shine, Can you dig in a little bit to that
Speaker 2: underweight on the mag seven and talk to us about
Speaker 2: the case for why is it partially evaluations? Mostly evaluations?
Speaker 2: Is it you know, the growth cycle and just other
Speaker 2: opportunities emerging sort of what's the case that you're making
Speaker 2: or that helped you make the decision process beyond portfolio considerations.
Speaker 3: Yeah, So part of it, I would say is that
Speaker 3: some of the easy money of the Magnificent seven has
Speaker 3: been made. So if you were to back up, you know,
Speaker 3: I mentioned I talked about how we were very underweight
Speaker 3: technology heading into twenty twenty two and the growth draw
Speaker 3: down there. But if you actually, you know, continue the story,
Speaker 3: what you'll see is at the end of twenty twenty two,
Speaker 3: in early twenty twenty three, we actually added back very
Speaker 3: significantly to technology, and that started with many of the
Speaker 3: Magnificent Seven, and we built up in video quite substantially.
Speaker 3: Once again, we went very overweight meta, for example, and
Speaker 3: so we're willing to pivot based on the risk rewards
Speaker 3: that we're seeing at at that moment in time. One
Speaker 3: of the reasons why we led with the Magnificent seven
Speaker 3: when we're adding back tech exposure is because the risk
Speaker 3: rewards were incredibly interesting. The free cash yield that we're
Speaker 3: seeing relative to the growth we're extremely exciting, particularly relative
Speaker 3: to more defensive sectors such as consumer staples. As we
Speaker 3: sit here today after a really really strong twenty twenty three,
Speaker 3: in early twenty twenty four, what we see is that
Speaker 3: the risk rewards aren't as compelling as they once were.
Speaker 3: We don't think that this is you know that we're
Speaker 3: seeing valuations that are bubbly in the Magnificent seven, but
Speaker 3: we just think that the valuation starting point is less interesting,
Speaker 3: and so then you know, we get into our process
Speaker 3: of looking at where do we have the most differentiated
Speaker 3: view on the company's future earnings power? And I would
Speaker 3: say that it's to varying degrees. And so Meta is
Speaker 3: one example of a company within the Magnificent seven that
Speaker 3: we still have a very differentiated view on the company's
Speaker 3: long term earnings power, or we have a nice sized pet.
Speaker 3: When we look at many of the others, our view
Speaker 3: is no longer as differentiated. And we think it's really
Speaker 3: important in an environment where we don't have as much
Speaker 3: of a differentiated view to utilize that capital to invest
Speaker 3: in other companies in other sectors where the magnitude of
Speaker 3: our differentiation is hired.
Speaker 2: Today. Great, and I know you mentioned healthcare is an
Speaker 2: area where you've moved to an overweight. What specific themes
Speaker 2: are really interesting to you or is it a somatic
Speaker 2: based sort of overweight. What's driving that healthcare exposure right now?
Speaker 3: Yeah, it's interesting because it's actually quite diversified, and again
Speaker 3: it's just finding great bottoms up opportunities. And so I
Speaker 3: would just unpack that a little bit and talk about,
Speaker 3: you know, a couple of things that are of interest
Speaker 3: to us within healthcare. First, I would start with biotech
Speaker 3: and biopharma. That's a sector within growth. It's been out
Speaker 3: of favor for many, many years, and you know, we
Speaker 3: do think in an environment where interest rates are coming
Speaker 3: down again and there are many really high quality companies
Speaker 3: that have really really interesting catalysts that we're finding many
Speaker 3: more interesting opportunities irrelevant of the macroeconomy. I mentioned Regeneron,
Speaker 3: for example, as being one of our largest positions. Regeneron
Speaker 3: is a great franchise, it trades it an attractive free
Speaker 3: cash yield. But I think what's even more interesting is
Speaker 3: that people underestimate the importance of their pipeline and the
Speaker 3: fact that they're utilizing genetic data in order to improve
Speaker 3: drug discovery. The one of the companies that have been
Speaker 3: doing this the longest, and we think people massively underappreciate
Speaker 3: their pipeline. We're also finding some interesting opportunities in biotech
Speaker 3: down the market cap spectrum as well. As nothing has
Speaker 3: been more out of favor than small and MidCap biotech.
Speaker 3: We're finding a lot of really interesting, high quality companies
Speaker 3: that super attractive risk rewards, where we have a very
Speaker 3: differentiated perspective on their future market opportunity. And then Beyond biotech,
Speaker 3: I would say, you know, another area that we have
Speaker 3: a lot of two would be GLP. Once we do
Speaker 3: think that the market massively underestimates the obesity market, and
Speaker 3: we think that Lily has a really strong competitive advantage
Speaker 3: even versus Novo, then will be a huge winner that people.
Speaker 3: This is a classic example where people think it maybe
Speaker 3: look a little bit more expensive on near term numbers,
Speaker 3: but people are massively underappreciating both the magnitude and the
Speaker 3: duration of the opportunity. And then beyond pharma, what I
Speaker 3: would say is that we're also finding some interesting opportunities
Speaker 3: on the device side. Intuitive Surgical's name that we've known
Speaker 3: for a very very long time and we've recently built
Speaker 3: it up again. They're a leader in robotic surgery, and
Speaker 3: they just came out with their latest new robot, which
Speaker 3: we think is going to be a really attractive catalyst
Speaker 3: to further inflect the penetration of robotic surgery. And we
Speaker 3: think we're just at the cusp of seeing the impact
Speaker 3: of that. We believe we have a very differentiated view
Speaker 3: in the market. And so I can go on and on.
Speaker 3: There's many more examples, but what you can see is
Speaker 3: that there's a lot of interesting opportunities from a bottoms
Speaker 3: up standpoint within healthcare, and we have to worry a
Speaker 3: lot less about the macro environment.
Speaker 2: Great, are you seeing anything in the consumer space right now?
Speaker 2: I get tons and tons of questions. So many people
Speaker 2: are so concerned about the consumer spending outlook and where's
Speaker 2: the consumer headed? But things like home builders are breaking
Speaker 2: out right and different. You know, there's some clear moving
Speaker 2: parts inside the consumer. How are you navigating that as
Speaker 2: a growth investor? Are there consumer stocks that are catching
Speaker 2: your eye or would this be a place you'd avoid.
Speaker 3: Yes, what I would say is that I just said
Speaker 3: at the beginning. But one of the things from us
Speaker 3: as growth investors is that when you think about our
Speaker 3: growth team, we're actually equally well resourced in every single sector.
Speaker 3: So we don't have a disproportion amount of tech analysts.
Speaker 3: We actually have a similar amount of consumer analysts and
Speaker 3: healthcare analysts, and so we really have proven over time
Speaker 3: the ability to generate alpha across sectors and that's been
Speaker 3: a key strength of our platform. And so as it
Speaker 3: relates to consumer, we actually are finding some interesting opportunity.
Speaker 3: I would say that we've been cautious on the consumer
Speaker 3: for some time, and as a result, when we think
Speaker 3: about the opportunities that have been most attractive to us
Speaker 3: and has been in I would say two categories. Either
Speaker 3: the value areas of consumer such as for example, we
Speaker 3: own tj X, which is a leading off price retailer.
Speaker 3: It's a great example of a company that's able to
Speaker 3: take advantage of many of the issues in the consumer sectors.
Speaker 3: There were significant amounts of over inventory that was happening
Speaker 3: within the consumer sector. In TJX, they're the largest off
Speaker 3: price retailer and they have the greatest buying power to
Speaker 3: take advantage of buying those great brands at discounted prices
Speaker 3: when others have too much inventory. As a result, they've
Speaker 3: been one of the few consumer companies that have been
Speaker 3: able to put up really, really strong results and they're
Speaker 3: able to consolidate significant amounts of market share from the
Speaker 3: department stores. And so that's been a good example of
Speaker 3: where we've been able to find some interesting consumer syxical opportunities.
Speaker 3: We've also focused a lot on consumer tech as well,
Speaker 3: and so we've owned for example, door Dash as well
Speaker 3: as Uber. Those are great examples of businesses that irrelevant
Speaker 3: of the economy. They're consolidating significant amounts of market share,
Speaker 3: and I think most importantly, they become much better industries
Speaker 3: from a competitive intensity standpoint than they've been historically, which
Speaker 3: has resulted in much more attractive profitability and free cash
Speaker 3: flow generation. And I think DoorDash is a good example
Speaker 3: of how we use our imagination to dream to dream.
Speaker 3: I think most people when they think of DoorDash, they
Speaker 3: think of food delivery and the food delivery business. They're
Speaker 3: a leader, they've don does a great job at consolidating
Speaker 3: market share, and we expect that to continue. But when
Speaker 3: we think about the larger market opportunity that people are underappreciating,
Speaker 3: you have to think about the fact that every brick
Speaker 3: and mortar retailer has to compete against Amazon. In these days,
Speaker 3: we've all become used to getting same day or next
Speaker 3: day deliveries and it's very hard for brick and mortar
Speaker 3: retailers to compete against that. DoorDash could utilize the logistics
Speaker 3: network in order to be able to help and partner
Speaker 3: with brick and mortar retailers. For example, they had recently
Speaker 3: announced a partnership with Low's, the home improvement store. So
Speaker 3: we think people are massively underappreciating the longer term opportunity
Speaker 3: for them.
Speaker 1: I do want to take a step back and kind
Speaker 1: of just talk about the ETF wrapper for a second. Yeah,
Speaker 1: you know, with active kind of coming back over the
Speaker 1: last year. You know, one of the things a lot
Speaker 1: of firms we're trying to do a few years ago
Speaker 1: was the the you know, active kind of semi transparent models,
Speaker 1: and a lot of the ETFs now that are gaining
Speaker 1: traction a more transparent. So, as a you know, a
Speaker 1: portfolio manager, is there anything you do different between you know,
Speaker 1: managing the ETF you know, versus the say, the growth
Speaker 1: advantage mutual fund, you know, with you know, having a
Speaker 1: portfolio that's transparent of their kind of considerations to go
Speaker 1: into that, Yeah.
Speaker 3: No, I think it's a really good question. What I
Speaker 3: would say is that is one of the reasons why
Speaker 3: we've combined our two biggest growth funds into one active
Speaker 3: ETF because of the transparency aspect of it. And so
Speaker 3: that was that's how we've thought of a lot of
Speaker 3: our active ETFs here on existing strategies, that we've combined
Speaker 3: two funds into one active ETF. As far as any
Speaker 3: differences in the way we manage a strategy. There really
Speaker 3: aren't any differences in the way that we manage the
Speaker 3: underlying strategies. One of the beauties of being part of
Speaker 3: such a big platform like JP Morgan is that we
Speaker 3: have an incredible ETF team that we partner with that
Speaker 3: makes all of the magic happen behind the scenes while
Speaker 3: we can focus on our investing as portfolio managers.
Speaker 1: That makes sense. Before we let you go, I just
Speaker 1: have one more question, you know, semi investment related. What
Speaker 1: are some of your favorite books? You know, whether it's
Speaker 1: you know, investment related or not.
Speaker 3: Yeah, so I would say more an investment standpoint, I
Speaker 3: have a lot, but I think one that summarizes the
Speaker 3: way I think about investing really well would be One
Speaker 3: Up on Wall Street, which is the idea of doing
Speaker 3: differentiated work to get a differentiated perspective on companies, and
Speaker 3: that really is our north star. That's how we tend
Speaker 3: to win, and it's by having a very different view
Speaker 3: and a company's fundamentals. And so as much as I
Speaker 3: love so many different books, that one tends to be
Speaker 3: my favorite.
Speaker 1: Great, Well, this is a great discussion. Felice and Gina,
Speaker 1: thank you so much for joining me today.
Speaker 3: Thank you so much for having me.
Speaker 2: Yeah, Thank you David, and thank you Phillise. A great discussion.
Speaker 2: It was lovely to have you on.
Speaker 1: Yeah, my pleasure until our next episode. This is David
Speaker 1: Cohen with the Inside Active.