A man runs past the New York Stock Exchange (NYSE).
The portfolio manager who helps run a mutual fund that consistently beats the market and its peers said the key to his success is being able to wait for stocks to pop.
The D.F. Dent Premier Growth Fund, which has returned over 15% annually over the past 10 years and notched a 42.9% gain in 2019, historically beats both the S&P 500 and the Morningstar average for large cap growth funds. The fund typically has around 40 stocks in its portfolio, with most of the holdings being large cap stocks. About 10% of holdings are small cap stocks, which the fund defines as market caps under $3 billion.
Bruce Kennedy, a portfolio manager at D.F. Dent since 2007 with prior experience at T. Rowe Price and Goldman Sachs and a co-manager of the fund, said the fund tries not to focus on capturing quick spikes in upcoming quarters but instead looks for stocks that have the potential to grow dramatically within a wider time window.
Being able to take a longer view gives the fund an advantage over other traders, Kennedy said.
“I had a former boss who shared with me the term of a popcorn stock. If you think about a kernel of popcorn you put in your popcorn popper, that kernel could pop in five seconds or it could pop in two minutes, except you’re pretty confident that if you put a kernel in the popper probably 95% of them will pop,” Kennedy said.
“So we look for stocks that are like that, where you’re not sure if the stock will work in the next three months or six months or maybe it will be…