Despite the stock market's recent strong performance, valuations remain generally attractive — and uncertainty abounds, according to Tom Ognar — manager of the $2.4 billion
Wells Fargo Advantage Growth Fund Ticker:(SGROX).
“The public still doesn't want to buy into the stock market, which is illustrated by 12 months of equity mutual fund outflows,” he said. “You could see the public re-engage at some point, but our bias right now is that there is as much risk of a big up move by the market as there is risk of a big down move.”
Even though Mr. Ognar relies on fundamental research in managing the portfolio, which has about 100 stocks, he strives to remain conscious of the larger macroeconomic influences that are affecting markets these days.
The health care sector, for example, offers select opportunities, despite economic drags such as the uncertainty surrounding reform legislation and higher-than-average unemployment rates.
“Right now, it's a tougher operating environment for health care companies and there's not a lot of transparency on many of the reforms,” he said. “But on the positive side, in 2013, there will be 30 million more people coming on board with government-paid health care.”
The fund's largest health care position is Alexion Pharmaceuticals Inc. Ticker:(ALXN), but Mr. Ognar said the investment should not be interpreted as a bullish stance on health care stocks.
“This is not a call on health care reform, but it's a call on this company from a drug development standpoint,” he said.
He added that a lot of health care stocks are trading at attractive valuations, which are already factoring in the uncertainty of health care reform.
Mr. Ognar's basic research process involves looking for robust growth — preferably top-quartile. That growth also has to be sustainable and it has to be underappreciated by the market.
The strategy is not tied to any particular market capitalization range, although the fund is currently most heavily weighted toward large caps at 50% of the fund.
Mid-cap stocks make up 30% of the fund, followed by small-caps at 20%.
In recognition of the difficult economic environment currently facing the United States, Mr. Ognar has been tapping into the strength of the global markets by investing in multinational U.S.-based companies.
More than half of the operating revenue of the fund's top seven holdings come from overseas, he said.
“A lot of investors assume you can't find that kind of global exposure in U.S. stocks,” he said. “We're growth investors and a lot of our growth is coming from the engine that is the emerging markets.”
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.
