TRANSAMERICA'S PREMIER FUNDS
Some portfolio managers let the numbers do the talking and move in and out of companies quickly. Others take a different approach preferring to understand the management of a company first, then invest and stick with them.
Chris Bonavico, portfolio manager on both the Transamerica Premier Aggressive Growth Fund and the Transamerica Premier Small Company Fund, (800-892-7587).is solidly in the second camp.
"Our style is to only find leadership businesses," says Bonavico, who was been co-portfolio manager on both funds before taking over as primary portfolio manager on each last August. " We look for businesses that are going to earn great returns and be around for a while."
I met up with Bonavico at an annual Investment Company Institute gathering recently, where he answered some questions about the stock-picking style he uses for both funds:
Q: What sets your investment style apart from others?
Bonavico: It's research driven. But, we're not the only shop in the world that does great research.
Our style is to only find the leadership businesses and when do, to really take a significant position (in them) and invest. We're also not trading around the positions. We typically hold 25 to 30 stocks in each portfolio, stay concentrated and very focused on those great businesses.
Q: Do the businesses you invest in all have to be mature ones?
Bonavico: No. In fact in the Premier Small Company Fund we have the opportunity to invest in companies early on.
That fund currently has 27 stocks in it's portfolio and I want to emphasis that in the small company world there are plenty of stocks in the Russell 2000 that you might want to invest in but the majority of them are not going to earn a good return. So, it's much more important-- and more research intensive--- in the small company world to find companies that are ultimately going to become large companies and get to what I call "scale". Scale means that they can growth their revenues a lot faster than they can grow their spending.
Q: Let's talk about focused funds. In the 1980's focused funds performed horribly for the most part. Recently, that's all turned around. What's the difference between now and then?
Bonavico: I think a lot of focused funds previously were sector funds and those still exist. But, if you're focused on the wrong thing, and focusing on great businesses is never the wrong thing, you can run into problems.
Q: How do you define "great businesses" then?
Bonavico: The most important thing is forward thinking management.
The best example I can think of is Charles Schwab. And not just Chuck himself but the entire management team have always looked three, four years into the future. And, asked themselves who is my competition going to be in three years and what do I need to do the reinvent this business to compete.
That's very difficult to do. So many of the average managers are just dealing with the day-to-day and how they are going to meet their forecasts.
Then, once you find great management's in great businesses, and they (the company) knows you're a good shareholder because you're not trading in and our of their stock, they will open up more and tell you things like who their good suppliers are, who their good customers are, who their competitors are and who they respect.
Q: So once you've found a company you think is great you get to learn about other great companies?
Q: What do wannabe shareholders of either fund need to know about your management style?
Bonavico: That we are looking to invest in businesses that we understand and are on the edge of change. For instance, I own both Celera in the Aggressive Growth Fund. Celera is not well understood and I think the outlook for them is fantastic. Then do genomic work and also have the ability to perform studies that will give you probabilities of genomic outcomes and that's worth a lot.
Another thing investors need to understand is not to expect much turnover in either fund. There is really no better way to make money that to buy a great company that you'll never have to sell.
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