30 BARRON’S September 28, 2020
innovation is happening.”
After graduate school, Dai worked as a
pharmaceutical researcher at Procter &
Gamble—until a friend gave him Peter
Lynch’s book, OneUpOnWallStreet , which
“opened my eyes to investing,” Dai says. He
made a career change via an M.B.A. from
the University of Pennsylvania’s Wharton
School and got an entry-level analyst posi-
tion at a small firm. Weatherbie Capital
recruited him in 2001. “It was an opportu-
nity to make an impact and learn from an
expert in the industry,” says Dai, referring
to the firm’s founder, Matt Weatherbie.
Bennett also lived overseas as a child—in
Europe—and he, too, was drawn to the
sciences before parlaying those interests
into analyst positions at Fidelity and MFS
Investment Management. He joined
Weatherbie in 2007 after being recruited.
The team’s six members work together
to arrive at what they call the Weatherbie
50—the 50 small and midsize stocks that
best fit their criteria for growth and quality.
The fund’s top 15 positions typically make
up between 55% and 60% of assets.
Most of the holdings in the fund fall un-
der the heading of “foundation” stocks,
which check every box on six criteria: com-
panies that are small but have strong com-
petitive advantages, plus proven business
models and management teams, and that
consequently generate high returns on in-
vested capital along with double-digit earn-
ings and revenue growth.
Typically, a third of the fund can be allo-
cated to what the team calls “opportunity”
stocks: companies that have hit temporary
setbacksor whose businesses are evolving.
Case in point is college-textbook rental
company turned digital education firm
Chegg (CHGG), which was initially a short
position—a bet that the stock would fall.
“We didn’t like it because the textbook
business was the predominant side of the
business,” says Dai, explaining that text-
books are capital intensive and lack a
strong competitive advantage, especially
against the likes of Amazon.com (AMZN).
But the company has spent years build-
ing a digital database that goes along with
rented textbooks, and offers subscribers
step-by-step solutions to millions of practice
problems linked to those textbooks. The
fund took a long position in 2017. More re-
cently, Chegg has benefited from the reali-
ties of remote learning during the pandemic.
And there is plenty of room to expand, in-
cluding internationally, with overseas mar-
kets at slightly less than 10% of the busi-
ness, says Bennett.
While many retailers are shrinking,
Ollie’s Bargain Outlet (OLLI) continues
its plans to add to its 365 locations by
opening about 50 stores a year, with the
goal of more than 1,000 locations. The
company flexes its buying power to pick up
discounted merchandise, selling it to con-
sumers who flock to physical stores for the
thrill of finding a bargain. “The example I
like to give is a lime-green KitchenAid that
might not have sold well at Williams-
Sonoma,” says Bennett, who describes it as
a retail treasure hunt—similar to TJX Cos.
(TJX)—that offers a buffer against Amazon.
FirstService Corp. (FSV) isn’t a house-
hold name, but it is a leader in residential
real estate services, including property
management, maintenance, and repair. The
branded services side of its business in-
cludes California Closets and Century Fire
Protection. “We like to say it’s a pleasantly
boring business because it has produced
19% compounded annual revenue growth
over the last 20 years,” Bennett says of the
decadelong holding. FirstService also has
plenty of room to grow, he says. It manages
just 6% of units in its addressable market,
and is acquiring smaller players.
Though Dai started his career in phar-
maceuticals, he sees the value of nondrug
therapy, which is what Nevro Corp.
(NVRO) offers people who suffer from
chronic lower-back and leg pain. The medi-
cal-device company uses spinal cord stimu-
lation to reduce pain, and the Weatherbie
team says it potentially has broader appli-
cations. For example, Nevro recently an-
nounced successful trial results for treating
peripheral diabetic neuropathy, nerve dam-
age that affects two million U.S. patients. If
approved, “this would more than double
the addressable market,” says Bennett.
“There is significant growth potential still
to come.”B
Alger Weatherbie Specialized Growth
Total Return
YTD 1-Yr 3-Yr
ALMAX 19.1% 24.2% 20.1%
Russell 2500 Growth 8.6 16.8 12.9
Top 10 Holdings
Company / Ticker % of Assets
FirstService / FSV 6.0%
Chegg / CHGG 5.4
Nevro / NVRO 5.3
Paylocity Holding / PCTY 5.2
Progyny / PGNY 4.4
Casella Waste Systems / CWST 4.1
Insulet / PODD 4.1
Everbridge / EVBG 3.9
Ollie’s Bargain Outlet Holdings / OLLI 3.8
Acadia Pharmaceuticals / ACAD 3.1
Total 45.3%
Note: Holdings as of August 31. Returns through September 21;
three-year returns are annualized.
Sources: Bloomberg;Weatherbie Capital
Scoreboard: AnotherWave
(Covid revives,there’snoU.S.reliefinsight,andelectionworriesspiked.U.S.stockstanked,withfunds
down3.83% andtheS&P500off3.29%.Oilpricesalsofell,takingdownnaturalresourcefundsby9.24%.
OneWeek Year-to-Date
U.S.STOCKFUNDS – 3.83% – 2.48%
TOPSECTOR/AlternativeEqMrktNeutralFds 0.63 – 5.16
BOTTOMSECTOR/NaturalResourcesFunds – 9.24 – 44.05
S&P500 – 3.29 0.49
U.S.BONDFUNDS – 0.49 3.35
BloombergBarclaysAGGBond – 0.02 7.08
THEWEEK'STOP25
Fund InvestmentObjective OneWeek Year-to-Date
NvgtrSentryMgdVolI/NVXIX EquityMktNeutral 14.93% – 17.2%
GothamShortStratInst/GSSFX AltLong/ShortEq 5.31 – 6.5
MorgStanIDiscA/MACGX Mid-CapGrowth 4.86 87.7
MorgStanIGrowthI/MSEQX Multi-CapGrowth 3.69 75.5
TransamCapGrowthI/TFOIX Multi-CapGrowth 3.60 74.1
MorgStanInsightA/CPOAX Multi-CapGrowth 3.53 78.6
GMOSpecOpptysFdVI/GSOFX AltGlobalMacro 2.89 128.5
MF&VarRtnl/NWEMOInst/NUXIX AltLong/ShortEq 2.66 – 37.0
EventideExpoTechI/ETIEX Science&Tech 2.53 NA
HussmanInvStratGro/HSGFX AltLong/ShortEq 2.35 13.8
ZevenbergenGeneaInv/ZVGNX Multi-CapGrowth 2.21 79.0
RvrPrkLng/ShOpptyInst/RLSIX AltLong/ShortEq 2.19 35.7
ZevenbergenGrowthInst/ZVNIX Multi-CapGrowth 2.11 73.0
VirtusZevenInnGrStI/SCATX Multi-CapGrowth 2.09 67.7
FirsthandTechOpptys/TEFQX Science&Tech 1.96 31.5
AccessOneFxBrHYInv/AFBIX SpecialtyFixedIn 1.84 0.2
RydexInvHiYldStrH/RYIHX SpecialtyFixedIn 1.82 1.2
MorgStanIGlAdvI/MIGIX GlobalMulti-CapGrowth 1.66 49.9
MorgStanIAdvtgI/MPAIX Multi-CapGrowth 1.62 44.2
GuggenheimMNREInst/GUMNX RealEstate 1.38 9.2
DelawareSmdCpGInst/DFDIX Mid-CapGrowth 1.26 48.3
361GlobalL/SEqY/AGAWX AltLong/ShortEq 1.16 0.8
NuveenEqtyMktNtrlI/NIMEX EquityMktNeutral 1.09 – 8.1
CogniosMktNtrlLCInst/COGIX EquityMktNeutral 1.07 – 0.4
InfinityQDvsAlpIns/IQDNX AltMulti-Strategy 1.00 9.9
THEWEEK'SBOTTOM10
Fund InvestmentObjective OneWeek Year-to-Date
RydexEnergySvcsInv/RYVIX NaturalResources – 14.19% – 58.4%
FidelitySelEnrgySer/FSESX NaturalResources – 13.53 – 59.0
HighlandSm-CpEqtyA/HSZAX Small-CapCore – 13.01 – 64.1
InvscOppenSPMLPA+A/MLPLX EnergyMLPFunds – 12.35 – 59.5
USGlblWorldPM/UNWPX PreciousMetalsEq – 11.87 48.0
MidasFund/MIDSX PreciousMetalsEq – 11.23 17.7
USGlblGold&PM/USERX PreciousMetalsEq – 10.78 28.1
HuberCapSCValInst/HUSEX Small-CapValue – 10.41 – 33.3
InvscOppenGld&SMA/OPGSX PreciousMetalsEq – 10.36 34.5
JHancockRegBankA/FRBAX FinancialServices – 10.34 – 40.6
THELARGEST25
Assets 3-Year* 1-Week YTDFund (billions) InvestmentObjective Return Return Return
AmericanFundsGroA/AGTHX $114.6 Large-CapGrowth 15.1% – 2.64% 14.1%
FidelityContrafund/FCNTX 114.5 Large-CapGrowth 17.0 – 1.78 17.7VanguardWellingtonAdm/VWENX 93.3 MixTgtAllGro 7.6 – 2.57 0.0
AmericanFundsBalA/ABALX 82.8 MixTgtAllGro 7.3 – 2.03 1.4AmericanFundsEuPcR6/RERGX 78.5 IntlLarge-CapGrowth 4.7 – 3.48 2.2
AmericanFundsIncA/AMECX 72.5 MixTgtAllMod 3.7 – 2.84 – 4.9Dodge&CoxIncome/DODIX 67.0 CoreBond 5.5 – 0.54 6.8
PIMCOIncomeInst/PIMIX 67.0 Multi-SectorInc 3.6 – 0.77 1.0AmericanFundsICAA/AIVSX 64.8 Large-CapCore 7.6 – 3.33 – 0.0
Dodge&CoxStock/DODGX 63.6 Multi-CapValue 2.5 – 5.32 – 13.6AmericanFundsCIBA/CAIBX 60.7 GlobalEquityIncome 1.4 – 3.14 – 6.9
AmericanFundsWashA/AWSHX 60.2 Large-CapCore 7.2 – 3.54 – 5.8VanguardPRIMECAPAdm/VPMAX 60.1 Large-CapCore 10.7 – 3.65 – 0.7
BlackRockCashInstSLA/ 59.3 InstlMoneyMkt NA NA NATRowePriceBCGro/TRBCX 57.4 Large-CapGrowth 19.1 – 1.75 18.9
AmericanFundsFInvA/ANCFX 56.2 Large-CapCore 7.9 – 3.16 – 2.0PIMCOTotRtnInst/PTTRX 53.6 CorePlusBond 5.2 – 0.14 7.8
AmericanFundsNPerA/ANWPX 53.1 GlobalLarge-CapGrowth 12.1 – 3.34 10.1AmericanFundsCWGIA/CWGIX 52.9 GlobalLarge-CapCore 5.2 – 3.40 – 1.5
MetWestTotalRtnI/MWTIX 51.2 CorePlusBond 5.7 – 0.23 7.8VanguardWellesleyAdm/VWIAX 47.5 MixTgtAllocCon 6.2 – 1.74 2.0
VanguardTgtRet2025Inv/VTTVX 47.4 Mixed-AssetTarget2025 6.4 – 2.22 1.9VanguardIntlGroAdm/VWILX 46.9 IntlLarge-CapGrowth 14.6 – 2.93 26.3
VanguardSh-TmInvAdm/VFSUX 46.4 ShortInvGrade 3.6 – 0.14 4.2DoubleLineTotRtnI/DBLTX 45.6 USMortgage 3.8 0.09 3.7
*Annualized09/21/2017to09/24/2020.ThroughThursday. Source:Lipper