Debt drama obscuring great plays in the stock market: Hartford’s Carmen

The non-stop rhetoric surrounding the debt ceiling does not diminish the fact that there are still good stocks worth buying, according to Michael Carmen, manager of the $2.1 billion Hartford Growth Opportunities Fund Ticker:(HGOAX).
“I’m not a macro economist, but my underlying belief is that [Washington] will figure it out,” he said. “We’ve come a long way over the past 12 months, to the point where government gets it that spending has to be cut. So it will be messy, but I think they’ll come to the right conclusion.”
Mr. Carmen, who subadvises the Hartford fund from Wellington Management Company LLP, hasn’t let the noise of partisan political bickering distract him from his bottom-up stock-picking strategy.
“We’re seeking companies with accelerating trends that have top-line growth, coupled with operating expansion,” he said.
The heavily qualitative research process helped him move into health maintenance organizations last summer when most asset manager had abandoned the category.
“Our health care analyst picked the bottom for HMOs last year, and it made sense relative to my style,” he said. “Right now, health care is one of our biggest overweights.”
One of the HMO stocks Mr. Carmen bought last year is Unitedhealth Group Inc. Ticker:(UNH), which has gained 43.8% since the start of the year.
The S&P 500 is up 6.4% over the same period.
“I guarantee that last year, Unitedhealth was under-owned by my growth-investing brethren,” Mr. Carmen said.
His fund’s diversified portfolio of about 90 stocks also has a slight tilt toward consumer discretionary stocks, but not because Mr. Carmen is particularly bullish on consumer spending.
“I view consumer discretionary as a zero sum gain,” he said. “If Apple [Inc. Ticker:(AAPL)] has been a huge share gainer over the past few years, its coming from somebody else’s hide.”
Apple, as the largest position in the fund, still is not fully appreciated by most of Wall Street, according to Mr. Carmen.
“I’m very bullish on the iPad and I still think the iPhone is underpenetrated,” he said. “Apple is a company that is creating categories, and people are underestimating the earnings potential of the company, and that’s why it’s being valued like a value stock.”
His analysis illustrates the fund’s core style, which is growth.
“We’re looking for companies that are doing well and that we think are going to do even better,” he said. “We look for 30% to 40% upside in order to add a company to the portfolio.”
The fund has gained 7.7% since the start of the year.

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