M&A Just Beginning
Health care, energy, and tech--where the big companies have the cash, and the mid- and small companies have a lot of growth--are ripe for continued M&A activity, says Legg Mason ClearBridge's Evan Bauman.
Shannon Zimmerman: Just in terms of the category view, small caps have had a really nice run for a long term. Lots of folks are saying that large-cap growth looks like a very attractively valued area of the market. Again, I know that that's not the kind of work that you and Richie [Freeman of Legg Mason ClearBridge Aggressive Growth Fund] spend your time on, but from a point of view of an investor trying to put together a portfolio of funds, what's the case for aggressive growth? Maybe you are not even an aggressive growth kind of investor, but is there a reason to own a fund like this in a certain portfolio?
Evan Bauman: We refer to the fund as passive-aggressive sometimes in joking. It really is where we don't try to generalize in terms of market caps that are cheap or expensive. It's really bottom-up. If you look at some of the newer companies we've added, one was a $900 million small-cap biotech company. We added a company, a Human Genome Sciences, which is a mid-cap biotech. We added just around a $10 billion technology company. So, yes as a group, you can argue that large caps are cheaper, but they are not growing as fast as some of smaller companies. So, I think it's all risk-reward, and we just try to focus on the company level, companies that are attractively priced and that are growing fast.
Shannon Zimmerman does not own (actual or beneficial) shares in any of the securities mentioned above. Find out about Morningstar’s editorial policies.