'Emotional' market obscuring great stocks, says Goldman's Barry

A volatile stock market can be the best time for a disciplined investor to make money, according to Steve Barry, manager of the $3.5 billion Goldman Sachs Growth Opportunities Fund Ticker:(GGOAX). “When the markets are emotional, we stay clinical in our analysis,” he said. “Volatile environments are very friendly for the way we invest.” As a bottom-up stock picker, Mr. Barry believes he has an advantage at times like these, when investors tend to favor or shun entire sectors based largely on macroeconomic events. “The markets are very reactive today, because they’re headline-driven, but we’re trying to anticipate rather than react,” he said. “Right now the market is valuing sectors, and that gives stock pickers an advantage, because eventually the individual stock fundamentals will matter again.” Macro events such European debt issues, regulatory rhetoric and high unemployment all create opportunities, he said. “The winners and the losers are not being distinguished in the marketplace,” he said. “There is very little premium being paid for high-quality companies versus those that are more challenged.” Mr. Barry is co-chief investment officer of the growth investment team that manages $23 billion at Goldman Sachs Asset Management. In the Growth Opportunities Fund, he is focused on midsize companies with market capitalizations of between $1 billion and $15 billion. The general investment philosophy is to buy stocks as if he is buying the business. “We are looking for long-term prospects with dominant market share, recurring revenues, free cash flow, and high return on capital,” he said. The fund is most heavily invested in the following four sectors: consumer discretionary, financials, health care and technology. “We’re looking for companies that can give us 15% a year for three years, and we’re finding them,” he 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.