We are an all-cap growth mutual fund but tend to migrate toward mid- and large-cap stocks. To differentiate ourselves, we are thematic investors. We try to find four to six themes that we think have a 12- to 24-month time horizon. Then we invest in three to five names in that theme, so the portfolio is generally made up of 25 to 45 stocks, and we manage the holdings around those themes. If we have five stocks in a theme, and the average price of those stocks rises from $40 to $60, we may take some money off the table. Part of our investment process is trying to trade around the ebbs and flows that any group of stocks will inevitably have. We often look at a stock's valuation relative to its own history. If I get nervous about the stock market, I can buy put options to protect the fund. In 2008 that helped a lot.
The stats: Boston's Hellman Jordan Management oversees $600 million. Jordan Opportunity's (JORDX) 6.6 percent five-year annualized return beat the S&P 500's 2.2 percent return and 95 percent of its large-cap growth peers
Jordan on his picks:
1. United Continental Holdings
I believe the airline industry in the next 10 years is going to be a less cyclical and more profitable business than it has been in the last 20 years. United (UAL) is very cheap. It's $24, and I think it could reach $35 or $40 in 2011. It trades at just six times 2010's earning estimates—low for its history and about a 50 percent discount to the airline sector. The company has already been through a bankruptcy, so it doesn't have the same union or pension issues that its competitors have.
Mosaic (MOS) is one of a handful of suppliers of concentrated phosphate and potash fertilizer. This oligopoly will maintain pricing at a time when the world needs to start spending a huge amount to produce grain more efficiently. Growth in emerging markets means we've got 500 million more people in the middle class now vs. one decade ago. They'll require more food. Mosaic's probably trading at 11 or 12 times estimated 2011 earnings—slightly less than its peers.
As a maker of flash memory microchips, SanDisk (SNDK) is a play on smartphones and tablet PCs. What I like is that I don't have to try to pick the winner of the tablet PC or smartphone race. Maybe it will be Apple (AAPL), maybe it won't. But these devices all have flash memory in them. SanDisk trades at 13 to 14 times 2011 consensus earnings estimates of $3.81 per share. I think it will earn $6; by my estimate it trades at 8.5 times 2011 earnings. The company has almost never been this cheap.
4. Walt Disney
For 10 years the market has lauded companies such as Apple and Netflix (NFLX) that deliver media content in a stylish fashion while punishing people making the content. But nobody buys an iPod to listen to air. Content makers like Disney (DIS) will start pulling back access and raising fees, which will be hugely positive to bottom lines. Disney trades at 15 times fiscal 2011 earnings. I can see it trading at 25 times a $3 per share earnings number in 2012—around where it's traded historically.