Bronze-rated Alger Small Cap Focus' discipline to identify and hold superior businesses for the long haul give the fund a good shot at outperformance.
Alec Lucas: Bronze-rated Alger Small Cap Focus has considerable promise. Its manager, Amy Zhang, is new to the fund, as of early 2015, but not to small-cap stocks. Before joining Alger and taking over the fund, Zhang was a key contributor to a small-cap growth strategy that boasted one of the best risk-adjusted records in its Morningstar Category during her 12-plus years and handily beat the Russell 2000 Growth Index.
At Alger, Zhang is using the same concentrated, benchmark-agnostic approach. Focused on firms with operating revenues of $500 million or less, she looks for those with products or services that satisfy emerging needs and enable expansion into related markets. The fund's roughly 50-stock portfolio tends to have massive healthcare and tech overweights, which can hurt whenever stocks in those sectors drop sharply. Yet, over the long haul, Zhang's ability to identify and hold on to superior businesses--through their growth pains--gives this fund a good shot to outperform.
Thus far, it has done well. Its 6% annualized gain from her start date through November 2016 beat the index by 2 percentage points.
