A Deep Pool Of Fund Talent
At many funds, junior staffers work as analysts -- scouring financial statements, interviewing executives, and building revenue models -- before moving up to portfolio manager. Not so at the $1.5 billion Goldman Sachs Growth Opportunities Fund (GGOAX ). "Everyone on the team is an analyst, too," says Steven Barry, senior portfolio manager.
Barry counts 23 co-portfolio managers and analysts, while funds at smaller shops have only two or three. That deep well of talent is the primary reason for the fund's success. Its 8.1% five-year annualized return well surpasses the -3.7% average for mid-cap growth funds.
Although they run a mid-cap fund, team members also keep tabs on large-cap and small-cap stocks in different industries. That way Barry, whose specialty is technology and consumer stocks, will understand the impact of, say, Microsoft (MSFT ) launching a new software module on the companies in this fund.
Barry can also account for competitors that wouldn't show up on a list of mid-cap stocks. "If you're investing in retailers, you want to stay out of the way of Wal-Mart (WMT )," he says. For instance, Barry is a big fan of PETCO Animal Supplies (PETC ), which sells a lot more than just 40-lb. bags of kibble. "Wal-Mart has been succeeding in the pet category," he says. "But PETCO serves a more high-end customer base." A growing number of these customers are empty nesters who spoil their pets and buy the gourmet treats and chew toys PETCO sells.
Barry's team also looks for companies with a "strong franchise," a dominant market share and a recognizable name for a specific product. Although PETCO clearly has that trait, it's not always obvious in mid-caps, which often market to other businesses rather than consumers. "A midsize company may have an important franchise and brand name that neither you nor I are going to recognize," he says.
Besides the fund, Barry's team manages $30 billion in growth-stock funds and private accounts. But with so many analysts involved, there's no shortage of investment ideas. "With 23 people, we have an advantage in this marketplace," he says. In that regard, Barry heads a powerful franchise, too.
By Lewis Braham