Portfolio Manager Perspectives

Jeff Benjamin

Health care, tech among best small-cap bets, says Goldman’s Rabinowitz

Oct 18, 2010 @ 1:18 pm

By Jeff Benjamin

Health care, technology and consumer discretionary stocks are producing some of the best investment opportunities in the small- and mid-cap space, according to Jeff Rabinowitz, manager of the $680 million Goldman Sachs Small/Mid Cap Growth Fund Ticker:(GSMAX).

Mr. Rabinowitz, who has managed the fund since its June 2005 inception, is a bottom-up stock picker with an emphasis on dominant franchises in industries with high barriers to entry.

He refused to discuss specific positions in the fund, but said health care, consumer discretionary and technology currently represent more than half of the portfolio.

In the technology sector, for example, Mr. Rabinowitz pointed out that while the newest wave of smart phones and tablet computers are gaining appeal, there is support industries in the background that are also participating in that growth.

“The building block components and the infrastructure are often ignored,” he said.

The fund of about 90 stocks is supported by a team of 16 investment professionals who analyze stocks by industry, rather than by market capitalization.

“We’re focused on looking for ideas in areas where companies can gain market share,” Mr. Rabinowitz said. “We want companies with brand names or patent protection, but we also want the companies to be sustainable.”

The fund’s market-cap range is between $200 million and $7 billion, but the portfolio’s weighted-average market cap hovers around $2.5 billion.

While mergers and acquisitions activity is always a factor when analyzing small caps, with so many larger companies sitting on record levels of cash, acquisitions have become an even bigger consideration, Mr. Rabinowitz said.

Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.


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