The stock market over the next several months will be most kind to those companies that have the ability to grow in a slower economy, according to Arthur Moretti, manager of the $1.1 billion Neuberger Berman Guardian Fund (NGUAX).
And at this point in the economic cycle, avoiding certain investments — such as credit-sensitive financial companies, retailers and heavy industrial firms — is as important as picking potential winners.
“A lot of the stocks we're avoiding have benefited from a secular rebound and a belief that the rebound will continue,” Mr. Moretti said. “I think we've had a strong inventory cycle, but we're sort of in a mirror image of where we were in August 2008.”
By that, Mr. Moretti was implying that many of the companies that had the foresight to cut spending and production early in the downturn are the same ones that are ramping up now.
One example of a company that has grown even as the economy contracted in late 2008 and early this year is the fund's largest holding, Intuit Inc. (INTU), a financial and business management software company known for its Quicken programs.
“We're focused on companies that have a high value proposition in this economy,” he said.
Another company Mr. Moretti identified as having a “secular tail wind even in a slower growth environment” is Altera Corp. (ALTR), a manufacturer of programmable computer chips.
Mr. Moretti's fund typically holds between 30 and 40 stocks, and keeps annual turnover at around 20%, reflecting a holding period of between three and five years.
“We try to think of ourselves as business analysts,” he said, “and we're trying to buy shares of companies when they are statistically inexpensive.”
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