WEBVTT - A Top 1% Manager’s Strategy 0:00:00.400 --> 0:00:03.840 Strap on your parachute. It's time for What Goes Up 0:00:04.120 --> 0:00:13.880 with Sarah Ponzick and Mike Reagan. Hello and welcome to 0:00:13.960 --> 0:00:17.840 What Goes Up, a Bloomberg weekly market podcast. I'm Sarah Ponzek, 0:00:18.120 --> 0:00:21.200 reporter on the Cross Asset team, and Mike Reagan, a 0:00:21.320 --> 0:00:24.440 senior editor at Bloomberg. This week on the show, an 0:00:24.440 --> 0:00:27.880 election like no other. At the time of recording this episode, 0:00:28.000 --> 0:00:30.200 the next president of the United States has still not 0:00:30.320 --> 0:00:33.720 been declared. There's questions over the Senate too. But even so, 0:00:33.880 --> 0:00:37.239 stocks stage their best post election rally and history and 0:00:37.320 --> 0:00:40.920 text talks are back on top. So what's the deal, Mike, Well, Sarah, 0:00:40.960 --> 0:00:42.600 I don't know, but I will tell you. What the 0:00:42.640 --> 0:00:44.680 deal is with the end of the show is that 0:00:44.800 --> 0:00:47.240 we will finish off with the craziest things we saw 0:00:47.240 --> 0:00:50.280 in markets, of course, and uh. The deal is for 0:00:50.400 --> 0:00:52.919 listeners out there, if you saw something crazy, please give 0:00:53.000 --> 0:00:55.840 us a call on the Bloomberg Podcast hotline and leave 0:00:55.920 --> 0:00:59.120 us a voicemail and maybe we'll play your crazy thing 0:00:59.160 --> 0:01:02.920 on the show. Number is six four six three to 0:01:03.120 --> 0:01:08.440 four three four nine zero. Uh and sorry, Sarah. Very 0:01:08.480 --> 0:01:11.520 excited for this week's guests. As you know, I usually 0:01:11.560 --> 0:01:15.280 I'm excited regardless who the guest is, but especially excited 0:01:15.319 --> 0:01:18.480 this week first time on the show. He is a 0:01:18.520 --> 0:01:24.040 portfolio manager at Buffalo Funds. His name is Jamie Quare. Jamie, 0:01:24.080 --> 0:01:26.760 welcome to the show. Thanks for having me on. And Sarah, 0:01:26.760 --> 0:01:30.200 that firm name again is Buffalo Funds. You know, Buffalo 0:01:30.280 --> 0:01:32.959 Funds are like regular funds, just with hot sauce on top. 0:01:33.480 --> 0:01:35.240 Of course, you know Buffalo That was in my favorite 0:01:35.240 --> 0:01:37.759 slace night. I heard our other guests grown at that joke, 0:01:37.840 --> 0:01:40.240 I think, which is not a good sign. Uh. And 0:01:40.319 --> 0:01:43.640 that voice that is our very own Chris Nag, executive 0:01:43.760 --> 0:01:47.040 editor at Bloomberg for Markets. Chris hasn't been on this 0:01:47.080 --> 0:01:49.640 show in a while, but he's got his own fan 0:01:49.720 --> 0:01:53.960 club out there who demands his appearance occasionally. So obviously 0:01:54.120 --> 0:01:57.840 very powerful fan club. They've managed to keep me keep 0:01:57.880 --> 0:02:00.240 me off the show for about nine months. If we 0:02:00.240 --> 0:02:03.160 weren't living through a pandemic right now, we weren't doing 0:02:03.200 --> 0:02:05.520 the podcast through Zoom, and we were still in the office, 0:02:05.560 --> 0:02:07.840 you know, you would be on more often. Yeah, I'm 0:02:07.880 --> 0:02:10.280 Sarah's boss, I would point out at this point. But anyway, 0:02:10.600 --> 0:02:14.200 your evaluation period is coming up. So we're having we'll 0:02:14.200 --> 0:02:16.160 have Chris on for every episode for the rest of you. 0:02:16.320 --> 0:02:18.880 But but Jai, of course I was joking about the 0:02:18.919 --> 0:02:21.320 hot sauce, but not a joke about how hot that 0:02:21.400 --> 0:02:24.240 that small cap fund has been doing really impressive. I 0:02:24.240 --> 0:02:27.560 want to get into your specific strategy because it's obviously 0:02:27.600 --> 0:02:29.920 you're doing something right. But before that, I want to 0:02:29.919 --> 0:02:32.720 talk a little bit about just small caps as an 0:02:32.760 --> 0:02:36.679 asset class um. You know, obviously, if you're you're looking 0:02:36.760 --> 0:02:40.600 at just the Russell two thousand, uh, still down on 0:02:40.639 --> 0:02:44.120 the year last time I checked, really been underperforming the 0:02:44.280 --> 0:02:47.000 SMP with all the mega caps for a few years. Now, 0:02:47.760 --> 0:02:51.120 what is sort of your outlook for not your fund 0:02:51.200 --> 0:02:54.440 and your specific stock picks in the fund, but just 0:02:54.560 --> 0:02:57.360 the small caps as an asset class in general. I 0:02:57.400 --> 0:03:00.480 think there's this kind of notion that maybe a need 0:03:00.840 --> 0:03:03.760 sort of a big fiscal stimulus, uh some kind of 0:03:03.800 --> 0:03:06.280 blue way from the election that that looks like it's 0:03:06.320 --> 0:03:09.880 not going to happen. But what's been holding small caps 0:03:09.880 --> 0:03:13.799 back compared to the mega caps in the SMP, And 0:03:14.000 --> 0:03:17.600 is there any reason to believe that the whole asset 0:03:17.680 --> 0:03:20.320 class can can sort of turn around and sort of 0:03:20.320 --> 0:03:23.480 close up that performance gap. Yeah, I don't know if 0:03:23.480 --> 0:03:25.760 that's totally fair, and i'd separate a little bit the 0:03:25.840 --> 0:03:28.520 kind of the growth versus value performance that we've seen 0:03:28.560 --> 0:03:31.320 within small caps. So certainly the value names have been 0:03:31.400 --> 0:03:35.680 dramatically underperforming growth this year, but growth in small cap 0:03:35.760 --> 0:03:39.600 has done quite well. If anything, I think that's probably 0:03:39.640 --> 0:03:42.320 going to continue to to go in terms of being 0:03:42.440 --> 0:03:45.600 a in favor of growth going forward. So, you know, 0:03:45.880 --> 0:03:48.520 things probably would have been a little bit better for 0:03:48.720 --> 0:03:51.640 small caps over the last couple of days if um, 0:03:51.680 --> 0:03:54.040 you know, there had been a massive stimulus, which looks 0:03:54.080 --> 0:03:56.920 like obviously it's not going to come through with with 0:03:57.040 --> 0:04:01.320 kind of a split Congress. But overall, um, everything continues 0:04:01.400 --> 0:04:04.360 to be quite solid and the outlook is still very 0:04:04.440 --> 0:04:07.760 strong for small caps. Earnings have gone quite well. Um. 0:04:07.920 --> 0:04:10.480 You know, we still have the same I think concerns 0:04:10.480 --> 0:04:12.280 that everyone else does in terms of kind of what's 0:04:12.320 --> 0:04:14.720 going to happen with covid UM, But you know, we've 0:04:14.720 --> 0:04:17.720 got an accommodate of fed UM. I think it did 0:04:17.960 --> 0:04:20.800 will eventually have a little bit more stimulus that comes 0:04:20.839 --> 0:04:24.080 probably next year, maybe as a skinnier package that may 0:04:24.120 --> 0:04:26.920 come in the lame duck period. But overall, I think 0:04:26.920 --> 0:04:29.200 the autook for small cap is still still quite solid. 0:04:29.640 --> 0:04:32.520 So Jamie, just keeping it broad for now with the 0:04:32.520 --> 0:04:35.440 outcome of the election, Yes, it's still unclear, but is 0:04:35.480 --> 0:04:37.400 there any reason to believe though that the status quo 0:04:37.480 --> 0:04:40.359 and markets is going to change over the next twelve 0:04:40.440 --> 0:04:43.560 months three years, Let's keep it a little shorter, say 0:04:43.600 --> 0:04:46.360 twelve months with the outcome that we've seen, even though 0:04:46.640 --> 0:04:49.039 at least as it stands, it doesn't look like markets 0:04:49.080 --> 0:04:52.080 getting exactly what we were told it was pricing in 0:04:52.080 --> 0:04:54.719 ahead of time. Yeah, you know, I think from the election, 0:04:54.920 --> 0:04:57.240 I think the results really kind of threaded the need 0:04:57.279 --> 0:04:59.960 of pretty perfectly, and just in terms of you know, 0:05:00.040 --> 0:05:02.200 what would have been the best for the markets and again, 0:05:02.240 --> 0:05:06.440 like you mentioned, especially for growth investors. Um. Again, because 0:05:06.480 --> 0:05:08.520 we have a split Congress, we're not going to have 0:05:08.520 --> 0:05:11.120 a huge stimulus, so that you know, the market overall 0:05:11.240 --> 0:05:13.680 really likes to see gridlock, and that's certainly what we're 0:05:13.680 --> 0:05:16.600 getting from here. Um. And you know, it really takes 0:05:16.640 --> 0:05:19.440 off things like you know, tax increases on both the 0:05:19.440 --> 0:05:23.320 corporate and personal side. Um. You know, the interest rates 0:05:23.360 --> 0:05:26.480 are probably gonna stay pretty low given that we're probably 0:05:26.480 --> 0:05:28.640 not going to have this big reflationary period that was 0:05:28.680 --> 0:05:33.120 expected if if we boosted stimulus pretty dramatically. So yeah, 0:05:33.160 --> 0:05:35.159 like I said, I think it's really is kind of 0:05:35.200 --> 0:05:38.640 status quo and and really the best possible outlook that 0:05:38.680 --> 0:05:42.359 we could have gotten from the election we got. You know, Chris, 0:05:42.400 --> 0:05:45.080 I'm I'm thinking back to when I started working for 0:05:45.120 --> 0:05:48.599 you with Bloomberg. I'm really gonna date myself here, way 0:05:48.600 --> 0:05:51.719 back in early two thousand and seven. Uh, George W. 0:05:51.839 --> 0:05:56.120 Bush was was still the president. Uh, you know, obviously, Uh, 0:05:56.160 --> 0:06:00.120 there was that two thousand and eight election, Um, and 0:06:00.120 --> 0:06:02.320 there was certainly some talk about while is Obama gonna 0:06:02.320 --> 0:06:04.279 be good or bad for the stock market, but really 0:06:04.320 --> 0:06:06.960 the whole world was was just distracted with the financial 0:06:07.000 --> 0:06:11.200 crisis at that point. I don't ever remember politics being 0:06:11.440 --> 0:06:15.000 this important to markets as they've been in the last 0:06:15.240 --> 0:06:21.040 few years, the Trump the Trump uh administrations specifically, How 0:06:21.080 --> 0:06:24.640 do you look at the intersection of politics and markets 0:06:24.720 --> 0:06:26.919 going forward? I mean it's I feel like the business 0:06:26.960 --> 0:06:29.960 page and the political pages of the newspapers have been 0:06:29.960 --> 0:06:33.000 fused together in the last four years. Are they going 0:06:33.040 --> 0:06:36.040 to be attached at the hip going forward? Is the 0:06:36.040 --> 0:06:39.560 political narrative under a Biden administration going to also be 0:06:40.040 --> 0:06:42.479 the market narrative, do you think, uh? Or will that 0:06:42.560 --> 0:06:46.120 wear off eventually and we'll be back to ignoring politics 0:06:46.200 --> 0:06:48.320 like we used to. Yeah. I mean what I would 0:06:48.320 --> 0:06:50.320 say is our role in the press will be, no 0:06:50.360 --> 0:06:52.440 matter whether it matters or not, it will be to 0:06:52.480 --> 0:06:54.679 make sure that those narratives are joined at the hips, 0:06:55.320 --> 0:06:58.080 whether they deserve to be or otherwise. What what I mean. 0:06:58.400 --> 0:07:00.200 I do feel like that's sort of the the key 0:07:00.240 --> 0:07:01.640 thing and the point that there is I'd be very 0:07:01.640 --> 0:07:04.039 interested to hear how our guests feels about that. I mean, 0:07:04.320 --> 0:07:07.440 there's a perception right now because of whatever some of 0:07:07.480 --> 0:07:11.120 the big personalities, possibly possibly because of things like Twitter, 0:07:11.360 --> 0:07:14.880 that no matter what happens on Earth, Uh, it gets 0:07:15.160 --> 0:07:18.400 dialed back to politics. And I wonder if you know 0:07:19.080 --> 0:07:22.760 it actually does matter significantly more now than it did 0:07:23.040 --> 0:07:26.160 back in the you know, Obama period or Bush period, 0:07:26.600 --> 0:07:29.240 or if it's just something that we we as journalists 0:07:29.280 --> 0:07:31.760 like to ascribe like everyone else. I mean, you look 0:07:31.800 --> 0:07:34.120 at the beginning of the Obama period, there was a 0:07:34.200 --> 0:07:36.840 lot you know, there was nothing like what's going on now, obviously, 0:07:36.840 --> 0:07:39.880 but there was a fair amount of naysayers willing to 0:07:39.920 --> 0:07:42.880 speak up against his likely stewardship of the things like 0:07:42.920 --> 0:07:45.640 the economy, in the stock market, and certainly in the 0:07:45.680 --> 0:07:49.400 stock market, nothing could have played out anymore against the naysayers. 0:07:50.000 --> 0:07:51.680 And to me, I look at something like that and 0:07:51.720 --> 0:07:53.920 I say, there's any of this is Is this just 0:07:54.440 --> 0:07:57.800 an imagined correlation that we should you know, to some 0:07:57.840 --> 0:07:59.880 degree stop talk. But I wonder what our guests thinks 0:07:59.880 --> 0:08:03.400 of how much of his investment philosophies premised on anything 0:08:03.400 --> 0:08:05.560 having to do with the government. Yeah, so Jamie, let's 0:08:05.600 --> 0:08:07.920 pose that question to you. Then our markets and politics 0:08:07.960 --> 0:08:11.160 actually tied at the hip, and should they be. I 0:08:11.200 --> 0:08:13.400 think they've been that way for the last four years. 0:08:13.400 --> 0:08:15.400 But I don't think there will be as much in 0:08:15.440 --> 0:08:17.440 the next four years. I mean, clearly we had a 0:08:17.520 --> 0:08:21.200 very polarizing figure in the White House, which certainly I 0:08:21.200 --> 0:08:23.880 think brought a lot more attention to that post than 0:08:24.240 --> 0:08:27.200 other than I Otherwise we would have had um But 0:08:27.560 --> 0:08:28.760 you know, I think it kind of is going to 0:08:28.800 --> 0:08:30.960 go back a little bit more to you know, more 0:08:31.040 --> 0:08:33.160 like how it was when Obama with an office, and 0:08:33.160 --> 0:08:36.120 when not every day had an event with a controversial 0:08:36.160 --> 0:08:39.120 tweet or something that was controversial that the market needed 0:08:39.200 --> 0:08:41.800 to figure out. You know, there are a few issues 0:08:41.840 --> 0:08:44.120 that will have to think about, you know, come early 0:08:44.200 --> 0:08:48.160 next year, when most likely Biden has inaugurated. But um, 0:08:48.400 --> 0:08:50.320 you know, I just don't think it's going to be 0:08:50.960 --> 0:08:53.840 quite as much of a focus going forward as it 0:08:53.840 --> 0:08:56.960 has been in the past. And quite honestly, just to 0:08:57.000 --> 0:09:00.720 mention one thing, in terms of how we manage money, UM, 0:09:00.760 --> 0:09:02.840 it has very little to do, quite honest with who's 0:09:02.880 --> 0:09:05.040 in the White House. Um. You know, we had a 0:09:05.080 --> 0:09:06.960 few names here and there that would have probably done 0:09:07.000 --> 0:09:10.040 better if the election had turned out different. But the 0:09:10.080 --> 0:09:13.520 way we invest, um, you know, with our process, it 0:09:13.600 --> 0:09:16.120 really kind of depends on what are the underlying long 0:09:16.200 --> 0:09:19.720 term trends that we see that are really impacting the 0:09:19.760 --> 0:09:22.520 companies that we invest. Uh, and that's going to change, 0:09:22.520 --> 0:09:24.920 not going to change regardless of who's in the White 0:09:24.920 --> 0:09:27.720 House or how much controversy there is in politics going 0:09:27.720 --> 0:09:29.880 on at the time. Jam's gonna say, I don't get 0:09:29.920 --> 0:09:34.400 the impression that you really thought about positioning for for 0:09:34.440 --> 0:09:37.120 this election too much at all. You seem to look 0:09:37.160 --> 0:09:42.400 for companies that have sort of a longer secular story, Uh, 0:09:42.640 --> 0:09:44.440 that is you know, I don't know if that was 0:09:44.480 --> 0:09:46.760 on purpose or it just so happens that the companies 0:09:46.800 --> 0:09:49.320 you're looking at are a little bit insulated from sort 0:09:49.320 --> 0:09:52.079 of the whims of the market. But walk us through 0:09:52.400 --> 0:09:55.640 how you do go about picking stocks, because I feel 0:09:55.640 --> 0:09:59.200 like this the small cap universe is so large that 0:09:59.240 --> 0:10:02.560 I'm always reus how managers like you start narrowing it down. 0:10:02.559 --> 0:10:04.520 I mean, does it start with some sort of stock 0:10:04.600 --> 0:10:09.160 screen for evaluation or growth metrics, or is it more 0:10:09.640 --> 0:10:13.840 sector specific targets. Walk us through sort of how you'll 0:10:13.840 --> 0:10:16.040 pick your next stop. What will be some of the 0:10:16.040 --> 0:10:18.800 criteria you're you're out on the look for. Yeah, sure, 0:10:18.880 --> 0:10:21.400 let me start with our process, Mike, so um, you know, 0:10:21.440 --> 0:10:24.480 it's pretty unique, but I think pretty intuitive. We really 0:10:24.520 --> 0:10:27.760 start with kind of looking at We've identified twenty six 0:10:27.840 --> 0:10:29.960 long term trends that we think are going to underlie 0:10:30.000 --> 0:10:32.760 the secular growth opportunities that we'd like to invest in. 0:10:33.200 --> 0:10:37.679 So these are things like corporate outsourcing, increasing demand for communications, bandwidth, 0:10:37.760 --> 0:10:40.400 e commerce, stuff like that. And generally these are long 0:10:40.520 --> 0:10:42.880 term trends, they don't tend to change much. We usually 0:10:42.920 --> 0:10:44.840 think about them being here for at least three to 0:10:44.880 --> 0:10:47.400 five years before they can kind of be considered a 0:10:47.440 --> 0:10:50.160 trend for us. UM. It really keeps us out of 0:10:50.200 --> 0:10:53.440 really deep cyclical companies and UM really we think it's 0:10:53.480 --> 0:10:55.120 going to give us a good positive tail when for 0:10:55.160 --> 0:10:57.520 the companies that we invest in, then we have a 0:10:57.520 --> 0:10:59.680 bottoms up effort where we go and we look to 0:10:59.720 --> 0:11:02.760 idea to find what we call premier companies UM. These 0:11:02.760 --> 0:11:06.400 are ones that have solid revenue growth. We like companies 0:11:06.400 --> 0:11:09.240 with high recurring revenues that don't have to resell their 0:11:09.360 --> 0:11:11.640 entire book of business every quarter to make their numbers. 0:11:12.120 --> 0:11:14.560 And we like proven management teams that we know we're 0:11:14.600 --> 0:11:17.720 gonna under promise and over deliver relative to the targets 0:11:17.720 --> 0:11:20.080 they set out for the street, companies with high margins 0:11:20.800 --> 0:11:24.640 UM and that are hopefully increasing scalable business models UH, 0:11:24.640 --> 0:11:27.080 and ones that really have kind of a sustainable competitive 0:11:27.080 --> 0:11:30.280 advantage versus their peers. So a lot of our ideas 0:11:30.320 --> 0:11:32.559 really kind of come out of what we shake out 0:11:32.600 --> 0:11:36.080 from those twenty six trends. You know, in addition to that, 0:11:36.160 --> 0:11:38.600 we have a lot of experience. We average about twenty 0:11:38.679 --> 0:11:41.160 nine years among the three of us that manage this product, 0:11:41.960 --> 0:11:45.360 and so you know, knowing those companies that since we've 0:11:45.360 --> 0:11:47.040 done this for a long time, we know the companies 0:11:47.040 --> 0:11:48.959 that are kind of stuck in small cap and are 0:11:48.960 --> 0:11:52.320 not likely to ever get out of small cap. We 0:11:52.400 --> 0:11:55.800 know those companies. And since we follow you know, particular industries, 0:11:55.880 --> 0:11:59.040 we know there's when there's a cyclical change in the 0:11:59.080 --> 0:12:02.600 space that we cover, or maybe some one that's gaining 0:12:02.640 --> 0:12:04.240 market share within that that we need to kind of 0:12:04.240 --> 0:12:07.000 take a look at a closer level. But that's really 0:12:07.040 --> 0:12:10.480 kind of how our ideas really shake out. In addition 0:12:10.520 --> 0:12:12.840 to you know, of course corporate management teams going on 0:12:12.920 --> 0:12:15.079 the road doing zoom calls, he says, instead of in 0:12:15.200 --> 0:12:17.960 office meetings. We look at the I p O market 0:12:18.000 --> 0:12:21.000 as well. So um, really our ideas came from a 0:12:21.000 --> 0:12:38.880 lot of different places. So before I get into some 0:12:38.960 --> 0:12:41.960 of those specific picks, Jamie, I want to talk about 0:12:42.000 --> 0:12:44.880 secular growth on a broad level. This week, the narrative 0:12:44.920 --> 0:12:47.240 has been all of a sudden that we might not 0:12:47.320 --> 0:12:50.000 get the blue wave that was expected. We've seen bond 0:12:50.040 --> 0:12:52.640 yields come down, and all of a sudden, secular growth 0:12:52.679 --> 0:12:55.440 has really come back and vogue across the markets. I mean, 0:12:55.480 --> 0:12:58.400 by Thursday, the NAZAC was up more than nine percent. 0:12:58.520 --> 0:13:01.480 It was pretty unbelievable. Is is there any way to 0:13:01.640 --> 0:13:04.840 actually explain this that, after the run that the NAZAC 0:13:04.920 --> 0:13:07.160 has already had, this here, all of a sudden the 0:13:07.240 --> 0:13:10.440 market gets an outcome that wasn't necessarily expected and you 0:13:10.480 --> 0:13:13.920 get a nine percent boost in less than a week. Yeah, 0:13:14.000 --> 0:13:18.480 not really no, But um I would say, as we've 0:13:18.520 --> 0:13:20.839 discussed a lot ourselves, I mean, the thing with the 0:13:20.920 --> 0:13:26.000 nastack goes up has become this sort of kind of 0:13:26.240 --> 0:13:30.240 funereal like I believe we were using the word buzzard 0:13:30.320 --> 0:13:33.199 like kind of symbol over the market at this point. 0:13:33.240 --> 0:13:35.719 It is not. I guess on one level, there is 0:13:35.720 --> 0:13:39.680 a cycle, there's a growth stock kind of optimism involved 0:13:39.720 --> 0:13:44.800 in that. But another just as uh watertight interpretation of 0:13:44.800 --> 0:13:48.040 what's going on there is that it's people expressing a 0:13:48.200 --> 0:13:52.200 kind of defensive pessimism about the economy and COVID. Why 0:13:52.200 --> 0:13:55.360 wouldn't you express such a thing right now? And you 0:13:55.360 --> 0:13:58.960 know you've got these basically bulletproof, as you have reported 0:13:59.000 --> 0:14:03.120 on before, almost in assailable intangible assets that do nothing 0:14:03.120 --> 0:14:05.880 but to throw off money, and you know you're safe, 0:14:05.920 --> 0:14:09.080 like like you would buy toothpaste stocks or whatever in 0:14:09.120 --> 0:14:12.679 the seventies. Now you buy basically all of the instruments 0:14:12.679 --> 0:14:15.959 that we're now talking over. I mean there's some Google, 0:14:16.040 --> 0:14:20.760 there's some uh Apple, there's probably some Facebook involved in 0:14:20.800 --> 0:14:22.360 what we're doing right now. You can't avoid any of 0:14:22.360 --> 0:14:24.720 this stuff. So people are buying that stuff like crazy 0:14:24.800 --> 0:14:27.600 just because they need similar to part money. And God knows, 0:14:27.640 --> 0:14:30.600 it's gone done nothing but gone up basically since forever, 0:14:30.680 --> 0:14:33.520 as far as the last five years are concerned. So 0:14:33.640 --> 0:14:35.720 I'm not sure that there's some kind of signal about 0:14:35.720 --> 0:14:38.400 the economy or good tidings or good time. There may 0:14:38.480 --> 0:14:40.760 very well be the opposite in that, and that, you know, 0:14:41.040 --> 0:14:45.040 I guess for lack of in the absence of better evidence, 0:14:45.120 --> 0:14:47.680 is what's happening again right now. People are just doing 0:14:47.680 --> 0:14:50.360 what they've learned to do in a Pavlovian way. I 0:14:50.360 --> 0:14:52.720 guess the fear comes in when you have such a 0:14:52.800 --> 0:14:55.640 concentration in such a few names. I mean, what is 0:14:55.680 --> 0:15:02.080 the top four weights in the SMP are inde right now. So, Jamie, 0:15:02.120 --> 0:15:05.200 I'm wondering from your perspective, when you're assembling of fund 0:15:05.240 --> 0:15:09.080 like yours, do you worry about sort of um, Obviously 0:15:09.120 --> 0:15:11.960 you're not going to have a concentration of individual names 0:15:12.000 --> 0:15:15.520 that high, I would assume, But do you worry about, say, 0:15:15.560 --> 0:15:18.480 a concentration in specific sectors. You know, I'm looking at 0:15:18.480 --> 0:15:21.760 the small cap fund a lot of biotech, healthcare, pretty 0:15:21.800 --> 0:15:25.480 heavy waiting there. Do you at least mentally or actually 0:15:25.920 --> 0:15:29.320 have written down somewhere any type of limit on on 0:15:29.560 --> 0:15:32.800 the waitings of sectors or is it just flow from 0:15:32.800 --> 0:15:35.520 your process and you don't you're kind of agnostic to 0:15:35.760 --> 0:15:38.800 to what sectors you're you're loaded into. Yeah, we do 0:15:38.880 --> 0:15:42.800 have some limits on industry waitings about they're so high 0:15:42.880 --> 0:15:45.200 that quite honestly, I don't think I would ever get 0:15:45.240 --> 0:15:48.560 close to kind of what stated saying our perspectives, but 0:15:48.640 --> 0:15:51.880 certainly we have to think about that. Um. You know, 0:15:51.960 --> 0:15:55.000 you mentioned biotech. It is a very very large part 0:15:55.040 --> 0:15:57.240 of the rest of the two thousand growth index. And 0:15:57.320 --> 0:16:00.240 quite honestly, these are companies that aren't aren't really kind 0:16:00.240 --> 0:16:02.080 of what we spend a lot of times doing. They're 0:16:02.120 --> 0:16:05.760 heavily reliant on the capital markets to fund their future growth. 0:16:05.800 --> 0:16:08.360 There's a lot of binary risk that comes with you know, 0:16:08.760 --> 0:16:12.720 clinical stage assets, whether they're able to hit endpoints and 0:16:12.800 --> 0:16:14.600 stocks her up a ton, and if you miss it's 0:16:14.680 --> 0:16:18.520 lick out below. So, um, you know, we we try 0:16:18.560 --> 0:16:21.600 to find areas. So in healthcare it's things like you know, 0:16:21.680 --> 0:16:25.000 diagnostics or you know, some tools companies that we can 0:16:25.760 --> 0:16:29.040 get exposure to healthcare with businesses that we can actually 0:16:29.040 --> 0:16:32.240 feel good about owning. Um. But certainly, yeah, we kind 0:16:32.240 --> 0:16:34.800 of keep an eye on what's in the benchmark. We 0:16:34.880 --> 0:16:38.440 don't run our portfolio relative to what's in the bench 0:16:38.480 --> 0:16:41.600 market really comes more from the bottoms up ideas that 0:16:41.680 --> 0:16:44.360 we're finding. But um, yeah, like you said, we we 0:16:44.400 --> 0:16:47.880 don't have a huge concentration within any particular name, and 0:16:47.920 --> 0:16:51.440 we don't like to have huge overweights or underweights, um, 0:16:51.640 --> 0:16:54.120 relative to each individual sector that we will make a 0:16:54.120 --> 0:16:56.800 little bit of sector bets here and there. I'm looking 0:16:56.800 --> 0:17:00.040 at your performance right now, so here to day, a 0:17:00.160 --> 0:17:05.080 ninety nine percentile one year, ninety percentile goes on three year, 0:17:05.560 --> 0:17:08.199 five year. I'm curious this year though obviously it's been 0:17:08.240 --> 0:17:11.719 a pretty dynamic year in the midst of a pandemic 0:17:12.119 --> 0:17:14.359 the election, even though you might not factor that into 0:17:14.440 --> 0:17:17.240 your process too much. I wonder if there's anything this 0:17:17.320 --> 0:17:19.600 year that's really changed your outlook and how do you 0:17:19.880 --> 0:17:23.400 change any holdings or boost holdings within the portfolio. Yeah, 0:17:23.400 --> 0:17:26.159 we did do a few things, um, you know around 0:17:26.160 --> 0:17:28.800 the pandemic obviously made it a little bit different from 0:17:28.880 --> 0:17:32.320 kind of a normal year year like you talked about overall, 0:17:32.359 --> 0:17:34.920 you know, our process doesn't change again like I spoke up, 0:17:34.920 --> 0:17:37.919 but certainly when you see a you know, pandemic, and 0:17:38.200 --> 0:17:41.640 it's definitely an effect. How uh it affects the consumers. 0:17:41.640 --> 0:17:43.280 So we had a lot of names that kind of 0:17:43.280 --> 0:17:46.240 had rallied in to say January names have done you 0:17:46.320 --> 0:17:48.479 know quite well that we kind of said, all right, 0:17:48.840 --> 0:17:51.240 consumer can be pretty weak here, so we cut back 0:17:51.320 --> 0:17:54.399 quite a bit on those consumer names. And then of 0:17:54.440 --> 0:17:57.600 course when um, you know, the pandemic hit, you really 0:17:57.640 --> 0:17:59.320 got to take a look and see, you know, what's 0:17:59.359 --> 0:18:01.919 the truth stickle cality of some of these businesses. You know, 0:18:01.960 --> 0:18:05.199 how recurring are their revenues, you know, is what's their 0:18:05.200 --> 0:18:09.120 opportunity to be like once things start to recover. Um, 0:18:09.200 --> 0:18:11.439 So we did make some changes on what you know, 0:18:11.480 --> 0:18:14.119 we sold in consumer, but a few things here that 0:18:14.160 --> 0:18:17.280 we thought would actually kind of be beneficiaries. Certainly that's 0:18:17.280 --> 0:18:20.600 our trends go. There's some trends that actually accelerated through this. 0:18:20.800 --> 0:18:23.360 You know, I mentioned kind of e commerce and increasing 0:18:23.400 --> 0:18:26.800 demand for communications bandwidth. Um, you know, we we like 0:18:26.960 --> 0:18:29.199 to take advantage of some of those areas that you know, 0:18:29.240 --> 0:18:32.600 we had some socks that still got whacked despite you know, 0:18:32.640 --> 0:18:35.080 the fundamental is actually probably improving. So we kind of 0:18:35.119 --> 0:18:39.280 adjusted our portfolio accordingly. And so you know, that's part 0:18:39.320 --> 0:18:41.120 of the reason basically why I turnovers up a little 0:18:41.119 --> 0:18:42.840 bit higher than kind of on the normal years. We 0:18:42.880 --> 0:18:46.320 did try to take advantage of of some of those opportunities. 0:18:46.600 --> 0:18:48.840 One thing I love about looking under the hood of 0:18:48.880 --> 0:18:51.919 small cap funds is a lot of names that aren't 0:18:52.040 --> 0:18:54.520 exactly household names. You know, you think about how the 0:18:55.080 --> 0:18:57.960 like I was saying, the markets dominated in the large 0:18:57.960 --> 0:19:01.160 cap area by such a small number of name small caps. 0:19:01.240 --> 0:19:03.480 It's always intriguing to me. Sorry, I feel like we 0:19:03.480 --> 0:19:06.640 should list the some sicker symbols uh in Jamie's funds 0:19:06.640 --> 0:19:09.320 and see if NJ can can identify the stocks. I 0:19:09.400 --> 0:19:11.320 like it. It's a game other than prices, right, and 0:19:11.359 --> 0:19:18.520 I'm not the target of it. Okay, yeah, okay, Chris, 0:19:19.280 --> 0:19:20.919 all right, I'll start with an easy one because this 0:19:20.960 --> 0:19:26.040 is what I actually recognized. Ticker symbol love Southwest. No, No, 0:19:26.200 --> 0:19:29.399 that's all you, Madel. This is l O V like 0:19:29.480 --> 0:19:33.800 the old Al Green song. H. I don't know, yeah 0:19:33.920 --> 0:19:35.679 I did, I would. I didn't know the symbol, but 0:19:35.720 --> 0:19:39.600 it's love sack, which is those bits bank chairs. Right. 0:19:39.600 --> 0:19:41.640 What do you like about love sack, Jamie? What got 0:19:41.680 --> 0:19:44.400 you into that that name? Yeah? So what initially got 0:19:44.440 --> 0:19:46.800 us into it is the stock and they had great 0:19:46.800 --> 0:19:49.440 products um and the stock actually kind of gotten beaten 0:19:49.520 --> 0:19:51.680 up because of China terrorists as they sourced all out 0:19:51.720 --> 0:19:55.119 of their goods out of China. But you know, we 0:19:55.160 --> 0:19:57.000 actually kind of took a test drive, went over to 0:19:57.040 --> 0:19:59.800 the store, like to the products, found them really compelling. 0:20:00.040 --> 0:20:02.480 A Like you said, they have basically a modern version 0:20:02.480 --> 0:20:05.240 of a bean bag, and they've been getting into sectionals 0:20:05.240 --> 0:20:07.840 which they call sactionals, and they have a lot of 0:20:07.840 --> 0:20:10.080 innovation around kind of new product there that we got 0:20:10.080 --> 0:20:13.320 excited about. And Stock was, you know, we thought very 0:20:13.400 --> 0:20:16.400 very much undervalued. One of the things that they did 0:20:16.480 --> 0:20:20.840 exceptionally well during the during the pandemic time was you know, 0:20:20.880 --> 0:20:24.800 they had about nineties showrooms that they had, Uh clearly 0:20:24.840 --> 0:20:27.720 a lot of those got closed, so they they furloughed 0:20:27.760 --> 0:20:30.560 some employees but actually got some and kind of got 0:20:30.600 --> 0:20:33.880 them online and readjusted their marketing campaign to more digital, 0:20:34.560 --> 0:20:37.320 and sales actually kind of took off from there. So 0:20:37.640 --> 0:20:39.879 you know, it's a product that can be delivered to 0:20:40.000 --> 0:20:43.119