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Equity Perspectives

video

Portfolio Manager Tom O’Halloran describes how he discovers and evaluates stocks for the growth portfolios.

Transcript

TOM O’HALLORAN:
As I come to work every day I think I’m going to play for the Stanley Cup… And I view the market as that six foot five, 250-pound defenseman that’s trying to put me through the boards.  Somehow or other we have to get around that defenseman and shoot the puck and score goals.

What is a Growth Leader?

TOM O’HALLORAN:
A growth leader is an innovative company that is doing something that’s changing the world either through a new product, a new service, a new platform.  It is a progenitor of creative destruction which is the hallmark of the capitalist system that we advance, we progress, through change, through new products, new services, new marketing channels.  And the way capitalism works out is that it is really a race to win and so in most markets one or two companies get most of the marbles. 
So, we’re looking for those four elements that make up the great businesses that we try to seek exposure to

1. Strong Business Model

TOM O’HALLORAN:
We look at the business model itself, so we’re looking at the assets of the business and what we like to see is a business that has a steady demand for its product or service so that it can be perceived to be annuity-like, and therefore worthy of a higher valuation…

2. Exceptional Management

TOM O’HALLORAN:
The second thing is people sometimes think of companies as abstract entities; we think of them as organic entities.  They are people and so the managements of growth leaders need to be exceptional

3. Healthy Business Environment

TOM O’HALLORAN:
And then we need to look at the business environment that the company’s operating in.  So, we’d like to make sure that the industry conditions are healthy…

4. Leading Companies

TOM O’HALLORAN:
And then fourthly, we want that company that is the leader, or one that is gaining share on the leader because in capitalism winners take most. 

Portfolio Design

TOM O’HALLORAN:
Our process is a search for the most innovative companies that we believe have the highest return potential. We have a process that we follow consistently, a process that is flexible enough to adapt to different environments, and all of those things enable us to, we believe, offer a superior alternative, as an active manager, to a passive investment vehicle. We’re looking for the great businesses that can return much higher than the average company over time.  We also realize that we do not own the companies themselves, we own their stocks and the stock market many times marches to the tune of its own drummer.  And so we use macro and technical analysis to try to determine when to own or how much to own of those special companies.

The Team

TOM O’HALLORAN:
The team concept is very important for what we do here at Lord Abbett.  On a small-cap team, we have half a dozen people dedicated to the small and micro-strategies and then we have the benefit of the 20 research analysts in the central research group to work on the large-cap strategy as well.  So, we have two to three dozen people that are focused on trying to deliver alpha in these growth strategies…the fundamental research is a critical component of what we do.   It’s actually a fundamentally research-driven approach and there are many different industries and sectors and so we need to have several analysts who specialize in those sectors and industries so that we can get the proper information to make the right decisions at the portfolio level. 

Why Growth?

TOM O’HALLORAN:
We think this is a great time to be a growth investor and we think the growth leaders strategy is a—is a great way to capitalize on the opportunity, and the opportunity is that because of demographics and too much debt in the world, there’s not a lot of growth in the world and there’s not likely to be much growth for quite a while.  But at the same time we’re living in the midst of the technology revolution and there is incredible innovation going on within the economy, and the growth leaders strategy is designed to gain exposure to that.

One More Thing

TOM O’HALLORAN:
Other forms of investing are a science…Growth investing is not a science, it’s an art… Growth investing is venturing into the unknown and unknowable to achieve higher returns…it’s a wonderful thing to have a job where you’re just studying the world every day and trying to glean which way it’s going and how that’s going to impact your companies and the prices that people will pay for them…

Lord Abbett.
Investment-Led. Investor-Focused.

The value of investments in equity securities will fluctuate in response to general economic conditions and to changes in the prospects of particular companies and/or sectors in the economy. While growth stocks are subject to the daily ups and downs of the stock market, their long-term potential as well as their volatility can be substantial. Investments in growth companies can be more sensitive to the company's earnings and more volatile than the stock market in general. No investing strategy can overcome all market volatility or guarantee future results.

This broadcast serves as reference material for information purposes only; does not constitute an offer to acquire, solicitation for an offer to acquire, an offer to sell or solicitation for an offer to buy, any securities, nor is intended to be relied upon as a forecast, research, or investment advice on any securities, and cannot be used for any of the foregoing.
The views and opinions expressed by the Lord Abbett speaker are those of the speaker as of the date of the broadcast, and do not necessarily represent the views of the firm as a whole. Any such views are subject to change at any time based upon market or other conditions and Lord Abbett disclaims any responsibility to update such views. Neither Lord Abbett nor the Lord Abbett speaker can be responsible for any direct or incidental loss incurred by applying any of the information offered.
The value of investments and any income from them is not guaranteed and may fall as well as rise, and an investor may not get back the amount originally invested. Please consult your investment professional for additional information concerning your specific situation.
This broadcast is the copyright © 2015 of Lord, Abbett & Co. LLC. All Rights Reserved. This recording may not be reproduced in whole or in part or any form without the permission of Lord Abbett. Lord Abbett mutual funds are distributed by Lord Abbett Distributor LLC.
FOR MORE INFORMATION ON ANY LORD ABBETT FUNDS, CONTACT YOUR INVESTMENT PROFESSIONAL OR LORD ABBETT DISTRIBUTOR LLC AT 888-522-2388, OR VISIT US AT LORDABBETT.COM FOR A PROSPECTUS WHICH CONTAINS IMPORTANT INFORMATION ABOUT A FUND'S INVESTMENT GOALS, SALES CHARGES, EXPENSES AND RISKS THAT AN INVESTOR SHOULD CONSIDER AND READ CAREFULLY BEFORE INVESTING.

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