Meet the veteran growth investor who picks stocks like Warren Buffett
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American Century Investments veteran portfolio manager Michael Li draws comparisons to Warren Buffett despite the fact that his main focus is on growth investing. Kansas City, Mo. manager Michael Li has been selecting stocks since 2000, with a focus on quality growth companies. The biggest mutual fund he oversees — American Century Ultra Fund (TWCUX) , with more than $15 billion in assets under management — has scored a 15% annualized return over the past 10 years, according to Morningstar. We look for long-lasting franchises that will sustain the growth of the business for many years. Li stated that we don’t look at niche businesses. Companies must meet a very high standard to gain access to our portfolios. When we find those companies we hold them long term. Morningstar was inspired to make a comparison between Li and Buffett when they searched for mutual funds which had the most stocks that were similar with Berkshire Hathaway. Li’s two funds — TWCUX as well as American Century Select Fund (TWCIX) — topped Morningstar’s list of “Funds that buy like Buffett.” Li stated that they could only understand why such a recommendation would be made because the fund’s focus is on quality, which Warren Buffett has. To identify high quality companies is key for us, and that’s also what I believe he wants. A large overweight in Apple is the most striking similarity between Buffett’s and Li’s portfolios. Ultra Fund, American Century Select Fund, and Ultra Fund each have over 15% of their portfolios held in the iPad manufacturer. Apple was Berkshire’s number one holding for several years. It has seen its value rise to over $120 billion. Buffett also considers the tech company one of his most lucrative investments. At one time, the conglomerate was worth more than $100 Billion on paper. This is a similar home run to the long-standing Coca-Cola investment by the Oracle of Omaha. “One difference is that he tends to shy away from technology historically — Apple being one exception, and we are sector agnostic,” Li said. Here’s the truth. Everything is being touched by technology. It is difficult to isolate technology from the rest. Buffett said that Apple is his favorite consumer product company. Berkshire also loves its stock buyback strategy. This allows Berkshire’s ownership of Apple to grow proportionately rather than decrease. There is overlap in Buffett’s portfolio and Li’s stock holdings such as Visa, Mastercard, Visa Plus, Amazon, and Moody’s. Li explained that he looks at financials of companies to find sustainable growth. To learn more about the company’s catalysts, which can be used to drive long-lasting business models, Li often meets with managers. We really want to become partners in the businesses we invest. Li stated that they aren’t looking for quick money. Recent picks by Li include Vertex, a biotech firm, and Analog Devices (a semiconductor manufacturer). Li’s growth-oriented funds, which are like many of his peers, have experienced a tough year due to rising inflation and increasing interest rates. Ultra Fund, the Select Fund, and Ultra Fund both have a combined loss of more than 25%. This short-term performance is not a concern for the buy-and-hold manager. Li stated that if we are able to identify companies with strong competitive advantages, then we think they will be able pass on inflation and costs to customers due to their pricing power. It is important to continue to invest in top-quality and most well-positioned companies to combat inflation. Li stated that they are not trying be macro forecasters. Li admitted that Buffett is someone he admires and that he has attended many Berkshire Hathaway’s annual shareholder meetings.
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