This fund seeks out innovation in companies large and small
By focusing on the characteristics of business innovation without regard for market capitalization, industry or geographic location, the Alpine Innovators Fund has developed a pattern of often moving independent from the overall market
Portfolio manager Sarah Hunt looks beyond all the usual market noise to home in on the innovation inside a company.
“We’re looking for an innovation edge, either in a type of product or in a business model,” she said.
Ms. Hunt co-manages the Alpine Innovators Fund Ticker:(ADIAX) along with Stephen Lieber.
The fund, launched in 2007, could be described simply as tiny, with just $12 million under management, as part of the $5 billion Alpine Funds shop.
While the fund’s size might prevent it from reaching some research screens, the strategy has proved its potential as an equity portfolio diversifier.
By focusing on the characteristics of business innovation without regard for market capitalization, industry or geographic location, the fund has developed a pattern of often moving independent from the overall market.
So far this year, the fund is up 11.7%, which compares with a 10.8% gain for the S&P 500.
On a three-year trailing basis, the fund has an average annual return of 18.9%, compared with the index’s 15.9%.
Of course, a lack of correlation can cut both ways.
In 2009, for example, the fund was up more than 50%, while the S&P 500 gained 26.5%.
But in 2008, the fund fell by 55.5%, while the index fell by 37%.
The portfolio is kept relatively concentrated, with between 30 and 40 positions.
Ms. Hunt explained that while innovation is often associated with industries such health care and technology, innovation can come in many forms.
Priceline.com Inc. Ticker:(PCLN) is one of the portfolio’s original stocks.
“This is a company that was an innovator because it changed the way people dealt with travel,” she said. “But it remains in the portfolio because of its continued development and expansion.”
Priceline’s stock is up more than 44% from the start of the year.
Intuitive Surgical Inc. Ticker:(ISRG) is another of the fund’s original positions that has evolved as an innovator.
The creator of the robotic surgical machine has expanded into the area of developing the surgical instruments used by those machines.
The stock is up 8.4% from the start of the year.
“We’re looking for companies that are doing things in a new area or doing something already being done but in a different way,” Ms. Hunt said.
Along those lines, there is Cray Inc. Ticker:(CRAY), a company with a well-established position of selling supercomputers to universities, research labs and governments.
But as technology has advanced and become more adaptable to other application, Cray has started applying its resources to meet the needs of smaller and more commercially oriented customers.
Cray shares are up 91% from the start of the year.
The fund has a 33% weighting in health care sector stocks and a 27% weighting in information technology.
“We don’t do this by running any big screens, but we do start with the industries that are most prone to innovation,” Ms. Hunt 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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