Jerry Castellini is quick to acknowledge that his investment firm’s specialty, large-cap-growth stocks, has been “the single worst-performing asset class” since he co-founded CastleArk Management LLC in 1999.
Jerry Castellini is quick to acknowledge that his investment firm’s specialty, large-cap-growth stocks, has been “the single worst-performing asset class” since he co-founded CastleArk Management LLC in 1999.
Still, Chicago-based CastleArk’s main investing strategy has returned an annualized 7.1% during that period, compared with flat results for the Russell 1000 Growth Index and 4% for the Standard & Poor’s 500 stock index.
For the six months ended June 30, the strategy’s 14.9% annualized return was nearly double the Russell benchmark’s 8.1%.
Mr. Castellini beat the benchmark with an emphasis on bullish energy holdings and an otherwise smallish portfolio limited to 45 to 50 stocks. Stocks are picked on the basis of price, compared with projected capital investment, as opposed to the more common price-earnings ratio.
Now, with the credit crunch making hedge fund strategies and
private-equity and other highly leveraged plays less attractive, Mr. Castellini thinks CastleArk is poised to take advantage of a shift in investor sentiment.
“We’re set for it to come back to dumb, long-only managers — dumb in quotes,” he said. “Our hope — and we’re seeing some signs of it: [Retirement] plans are saying it’s time to put money back in that space.”
Named after Mr. Castellini and co-founder Edward Clark, CastleArk has stayed small.
Of $2.5 billion in overall assets, $1.7 billion is in the large-cap-growth strategy. Most of the rest is in a $400 million bond portfolio and a $250 million energy portfolio.
Up to 20% of CastleArk’s total portfolio is energy-related, one of the highest weightings among growth managers. It devotes an even bigger share to technology stocks.
Major clients include The Boeing Co. of Chicago, the state of Arkansas and the city of Chicago.
Mr. Castellini’s track record isn’t perfect.
Two months ago, CastleArk replaced a team of managers after its small-cap-growth strategy lagged benchmarks, but the portfolio represents just $70 million, or 3%, of the firm’s assets under management.
CNS
