Quick Take: Companies of any size are eligible for entry into the Evergreen Omega Fund (EKOAX), but to catch the eye of lead portfolio manager Maureen Cullinane they have to increase profits consistently.
In addition to analyzing the financial characteristics of individual companies, Cullinane and her team look for businesses that stand to benefit from economic and demographic trends.
Lately, the managers have been finding the kind of stocks they like among technology companies, which make up a third of their holdings. The fund also has a big chunk of its assets in cyclical consumer stocks, which account for 23% of the portfolio. Another 20% is invested in health care companies.
Evergreen Omega, which has total assets of about $1.3 billion, was up 38.8% this year through November, compared to gains of 24.6% by its peer large-cap growth funds, and 22.3% by the Standard & Poor’s 500 index. The Evergreen fund returned 3.4%, on average, for the five years ended last month, while similar funds lost 1.7% and the index slipped 0.5%.
The Full Interview:
Earnings growth is the key factor when Maureen Cullinane decides whether to buy or sell a stock.
In choosing investments for the Evergreen Omega Fund, Cullinane, its lead portfolio manager, seeks companies that consistently fatten their bottom lines, preferably by at least 15% a year. Sometimes, she’ll accept less initially, but only if a catalyst seems to be working to boost future profits.
Improving margins are on Cullinane’s wish list, too, along with analysts’ estimates that get revised upwards and are then topped by actual results.
Beyond company-specific numbers, Cullinane considers economic and demographic trends, taking into account the direction of interest rates and inflation, and the strength of the dollar, among other things.
“We really kind of take a big picture view of the world and see where things are shaking out,” Cullinane says of herself and her team.
The fund can own companies of any size, but it usually ignores very small ones, Cullinane says. Currently, 15% of its holdings have market caps of $500 million to $2.5 billion; about half have caps of $10 billion or more; and the remainder have caps of $2.5 billion to $10 billion, she says. Evergreen Omega typically keeps 65-75 stocks in its portfolio.