Growth stocks have led the stock market for more than 10 years, and Michael Lippert, portfolio manager at Baron Opportunity Fund (BIOPX) He says they will continue to shine.
The fund has $1.3 billion in assets and invests in growth stocks of all sizes. It has generated annualized returns of 53% in the last 12 months, 3% in the last three years, 19% in the last five years and 16% in the last 10 years, according to Morningstar.
That beats Morningstar's growth rate for all but three years.
Lippert looks for companies with enormous growth that can be sustained thanks to their competitive advantages. You are a long-term investor looking to hold stocks for at least four or five years.
technology, particularly semiconductors and software, is now his favorite industry. He likes e-commerce and electronic payments, among others. The fund even owns a technology-based real estate company.
We recently spoke with Lippert to get his take on investing and several of his stock picks. Here is the conversation.
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Lippert's investment strategy
TheStreet.com: What is your investment philosophy?
Lippert: As growth investors, we look at where the world is going, not where it has been. We're looking at secular trends: what's driving growth in the economy. We focus on generational changes such as artificial intelligence and the cloud.
We invest in companies that we believe will be leaders, companies with the fastest and most durable growth. They maintain competitive advantages.
It's companies that turn revenue growth into profits. These are companies that don't do just one thing but rather build platforms (with multiple products), like Apple. (AAPL) and alphabet (GOOG) .
We focus on the long term, seeking to last for at least four or five years when we make an investment. We have held some of our stocks for over 20 years.
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TheStreet.com: What industries and market themes do you like the most?
Lippert: Our largest investments, in absolute terms and relative to the Russell 3000 growth index, are in software and semiconductors, and arise from the widespread trend in artificial intelligence.
Before that there was the cloud, software as a service and the digital world (Internet). Behind all that are semiconductors.
Our broader theme is innovation. That includes e-commerce, e-payments, streaming and healthcare segments such as genomics. Most of today's major trends have to do with technology.
TheStreet.com: What industries are you avoiding?
Lippert: Retail is not a big investment for us, although we like amazon (AMZN) and electric vehicles. Our investments in industrial and consumer staples are low.
These companies lack strong growth. They will grow with the economy (but that is not very strong). We are looking for parts of the economy that are taking part.
Lippert's Stock Picks
TheStreet.com: Can you tell us about some of your favorite stocks?
Lippert: Graphics processing unit chips are what's behind ai. They can perform many applications at once (unlike previous chips). The leading supplier is Nvidia. (NVDA) . It has experienced amazing growth.
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That's our number one holding relative to the Russell 3000 Growth Index. and number 2 in absolute terms after Microsoft (MSFT) .
We also think about advanced microdevices (amd) will be the number 2 player with a wide range of uses, after Nvidia. And we believe that Broadcom (AVGO) It will be number 1 among custom players.
Our second largest overweight position relative to the index is CoStar. (CSGP) , the commercial real estate information service. We've had it for over 20 years. Your key differentiator is your data.
It is the example of having multiple acts. He started by putting his information on CDs, then on the Internet, and now in the cloud.
CoStar's latest act is residential real estate, taking on players like Zillow (ZG) . It could be a billion dollar business.
CoStar's Homes.com is well positioned to benefit from new rules regarding broker commissions. Competitors Realtor.com and Zillow will be hurt.
Finally, we still believe in the media. These are digital media, such as streaming and podcasts. We have significant investments in Meta Platforms (GOAL) and technology Spotify (PLACE) .
They have great user experiences. Spotify profits from subscriptions and Meta is second in digital advertising after Alphabet.
Both will benefit from ai, which will help them know what content to offer to users. They can customize it.
That could allow Spotify to increase its prices. Now it's very cheap per minute. And ai should provide advertising opportunities for Meta. The more content they show that is relevant to individual consumers, the more value there will be for the user.
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