8 world-class investors share how they've positioned to profit from the long-awaited COVID-19 vaccine breakthrough — and the bets they've been making all year on a post-pandemic world

  • Stocks jumped after Pfizer and BioNTech said their COVID-19 vaccine was 90% effective in preventing the infection in a study.
  • The news gave a huge boost to stocks that are more economically sensitive.
  • Throughout the pandemic, Business Insider has been speaking to highly successful investors who discussed their approaches to the most vulnerable stocks and the beneficiaries of post-COVID changes. 
  • Visit Business Insider's homepage for more stories.

At times it's felt like the pandemic divided Wall Street into far-sighted visionaries and bargain hunters — investors buying based on how the world had changed, and those who were waiting to profit from a return to normal.

The truth is that most of them did some of both. But as global stocks skyrocket on the hope that a working COVID-19 vaccine is on the way, the market recovery is entering a new phase. Investors are feeling more certain they can invest in a world where the pandemic isn't their chief concern.

Here's how some of the most successful fund managers and investors of recent years handled the issue that defined markets in 2020 and will shape investing for years to come.

First up are those who divulged their plans for buying "recovery" stocks, which include some of Monday's star performers.

The small cap ace

Name: Ken Korngiebel

Claim to fame: Korngiebel managers the Wasatch Micro Cap Fund, which Kiplinger ranks as the best small-company stock fund of the last 20 years. Morningstar says it's returned 40.6% this year, more than double its benchmark.

Strategy: Korngiebel told Business Insider in April that he was looking for opportunities in consumer-focused stocks more intensely than he had in years.

"If you can look out and assume that there is going to be some kind of recovery in the next year or two, this is likely where you make a ton of money," he said. "We think there are opportunities to sift through those stocks that have underperformed the most and see if there's opportunities where babies have gotten thrown out with bath water."

Top picks: Boot Barn Holdings, Allegiant Travel, Chuy's, Mastercraft Boat Holdings.

The focus finder 

Name: David Baron.

Claim to fame: He co-manages the Baron Focused Growth Fund, which has returned 400% to investors over the past 10 years and is beating 95% of its peers in 2020 with a return of 71.6%, according to Morningstar data as of November 6.

Strategy: Baron didn't hesitate to invest in travel and entertainment companies during the pandemic even though COVID decimated their businesses.

"We think that they're going to be the first to benefit once a therapeutic or a vaccine is established in the market," he said in August. "Once the pandemics subsides, they should return to normalized earnings levels over the next two to three years."

Top picks: Penn National Gaming, Vale Resorts, Hyatt Hotels.

Mastering the middle

Name: Aram Green

Claim to fame: Green's ClearBridge Select Fund has consistently been one of the best mid-size stock funds of the last five years. Kiplinger says its annual return of 25.6% a year over the five years ended September 30 is topped by only three other funds.

Morningstar credits the fund with a 46.9% return in 2020 as of November 6, more than double the typical fund in its category.

Strategy: Green took a balanced approach to the upheaval. In June, he said he'd bought high-recurring revenue businesses like Wix, Shopify, and DocuSign, which benefited from the way work changed after the pandemic started. But he also invested in two areas that have been punished too severely.

"There were thoughts that the businesses would be impacted on the margin and the growth rates were going to be slower than what people forecast, and now having gone through at least the first couple of months of the crisis, that hasn't been the case," he said. "I've seen a sharp snapback there."

Top picks: Performance Food Group, XPO Logistics, Surgery Partners, Expedia, Trex, and Intercontinential Exchange. 

The value legend

Name: Bill Miller

Claim to fame: Miller's fund beat the S&P 500 for 15 years in a row through 2006. It's been a very difficult period for value investment, but his Miller Opportunity Fund has beaten 99% of its peers in recent years according to Morningstar.

Strategy: "On the other side, the names that always lead are those that are marginal returns on invested capital, are most susceptible to decline on the way down, and therefore they will recover the most on the way up," he said in March. "The more cyclical and the more leveraged you are, the more you went down, the faster you'll recover."

Top picks: As the market cratered Miller bought several airlines and still has a position in Delta and real estate companies like Annally. Recent investments include Uber and Rocket.

The following are some of the most successful investors who've been betting on themes that came to dominate the market after COVID upended the world traders knew. Central to their views is the idea that work, shopping, and recreation will be forever changed.

All-star analyst

Name: Brent Bracelin

Claim to fame: Bracelin covers business-focused cloud-computing companies for Piper Sandler, and according to TipRanks, he was the most accurate analyst on Wall Street as of the middle of 2020.

Strategy: Bracelin said in July that he was most optimistic about "franchise" companies that were on track for enormous growth even if their stocks looked pricey.

"These have the biggest opportunities, large addressable markets, differentiated technology with competitive moats," he said. "They all have a longer-term potential to be multibillion-dollar businesses and sustain high growth for the next decade."

Top picks: MongoDB, Shopify, Twilio, Bill.com, Veeva, Coupa Software.

The growth guru

Name: Chris Retzler

Claim to fame: His Needham Small Cap Growth Fund has been one of the best in the world over the last five years. Its 54.5% return in 2019 and its 37.3% year-to-date return more than double its benchmark, according to Morningstar.

Strategy: Retzler favors investing in communications equipment and infrastructure. Those companies often aren't flashy names, but they're essential for new technologies.

"We continue to emphasize in our portfolio those companies that have exposure to the work-from-anywhere environment," he said in July. "Communication and infrastructure and security are all themes that we have invested in, and have become more overweight in, because we think those secular trends are firmly in place."

Top picks: Retzler's "work from anywhere" stock picks include Infinera, FireEye, and Limelight Networks. He named Cambium Networks and MaxLinear as top names in the 5G portion of his portfolio.

The balance seeker

Name: Brandon Nelson

Claim to fame: Nelson's Calamos Timpani Small Cap Growth Fund has tripled its benchmark this year with a return of 43.7% year to date, according to Morningstar.

Strategy: "We want to see a company that has fast growth but also, importantly, underestimated growth," Nelson told Business Insider in April. "And the reason why is when you have both of those components, that's when you tend to get valuation expansion. A lot of companies are good at one but not both."

Major recent themes for Nelson have included housing, changing trends in recreation, and cloud-computing and remote work.

Top picksLGITopBuild, RedfinSportsman's Warehouse, OneWater Marine, Thor Industries,  RingCentral, Five9, Nice, and AudioCodes.

The e-commerce expert

Name: Colin Sebastian

Claim to fame: TipRanks named the Robert W. Baird senior analyst as the most accurate analyst covering e-commerce and the consumer discretionary sector at midyear.

Strategy: Sebastian said in July that the pandemic roughly doubled the share of people who shop online.

"Our assumption is that about half of that incremental market share shift will be retained," he said, "What that means is that e-commerce penetration in just a matter of three months will sustainably increase by about 50%." 

Top picks: Sebastian said a group of stocks he calls "WASP" might have more potential than the famous FANG stocks. The group consists of Wayfair, Amazon, Shopify and PayPal. He also took an upbeat view of eBay, Carvana, and Vroom.

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