CENTURY SMALL CAP SELECT FUND
Pros at the Century Funds in Boston have coined the term "Super Sector". And, based on this year's performance of their Small Cap Select Fund----which only invests in super sector stocks---they've called the market pretty well.
To understand what Century's super sector is, you've got to think big and color outside the box as the term is more of a blanket one referring to stocks within four different industries---financial services, insurance, health care and related technology companies.
A. Lanny Thorndike, the portfolio manager, says that as bottoms-up stock pickers, one thing analysts at Century do is talk to head hunters to find out who is leaving or staying at various companies. " That gives us a fair amount of visibility on where we think trends are going," says the 35-year old manager. "And in these industries, (the super sectors), the interesting thing is a lot of the value of these companies is people---not necessarily assets."
The Century Small Cap Stelect Fund, (800-321-1928), is up 44.2 percent since the fund was launched in February, handsomely whopping the average performance of other types of small-cap funds including small-cap growth funds, small-cap core funds or small-cap value funds.
With 45 stocks in the Century Small Cap Select Fund's portfolio, this new fund is having a great year because it has been in the right places at the right time. Here's more on it:
Q: Tell me more about the Super Sector.
Thorndike: It's made up of stocks that are in industries that basically manage risks for their clients, whether they are credit risks or health care risks or insurance risks.
Q: What do you find most interesting about the companies?
Thorndike: Probably the macro environment. The most obvious being the financial services companies because of the stabilizing of interest rates.
But there are four trends that we see taking place in the Super Sector. One is deregulation. With the passing of the Financial Services Reform Act in 1999, it's the first time that banks, brokers, asset managers, insurance companies, and credit card companies can begin to offer other services. Up until last year, for instance, banks weren't allowed to offer insurance products and visa versa.
The second trend is the convergence of these industries which had been segmented. The third is mergers and acquisitions, and the fourth, shifting demographics.
We look at the Super Sector as (representing) about 30 percent of the economy and all service based. And in general, with the aging baby boomers and the emphasis on retirement services and estate planning, as well as the transfer of wealth and the reform of the entitlement programs, the next 20 years are going to allow for dramatic opportunities to reconfigure health care and financial services companies.
Q: How so?
Thorndike: Right now services in each are typically delivered through an intermediary whether it's an insurance agent or bank teller. By taking that middle person out or squeezing it there will be a lot of opportunity for convergence.
Q: While it's a small-cap fund what are the largest and smallest holdings in it?
Thorndike: The median market cap for our portfolio is about $1.6 billion.Concord EFS, is our largest company at about $9 billion. Core Inc., is about a $27 million dollar company and currently our smallest holding.
Q: Would you give me an example of a company that's worked well for you this year and one that hasn't?
Thorndike: SEI Investments Co, which is a mutual fund servicing company is up probably 175 percent. They are in two sides of the business; they have an asset management side and a fund processing piece. The asset management side has been the best for them this year.
One that didn't work out was U.S. Interactive. It's a company that does Internet consulting. When their was a change in its CEO we peeled out of it.
Q: What do you expect the portfolio turnover rate to be?
Thorndike: Right now our turnover is fairly low. We anticipate it being about 40 percent. It possibly could be higher depending upon market conditions, but 40 percent is what we're managing it to.
|FUND:||Century Small Cap Select Fund|
|PERFORMANCE:||Up 44.2 percent from the fund's inception date of Feb. 25, 2000 through Nov. 15, 2000.|
|TOP SECTORS:|| Financial technology, 23 percent; asset managers, 13 percent; and banks, 9 percent.|
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