Quick Take: The AIM Global Aggressive Growth Fund/A (AGAAX) focuses on rapidly growing companies. Its emphasis on small-to-mid-sized ones, and its willingness to invest in emerging markets, has helped it in recent months.
The $883-million fund’s total return of 39.2% last year was not far below the 40.7% gain posted by the average international stock fund. But through the first five months of this year AIM Global Aggressive was leading its peers. It was up 5.6% at the end of May, while similar offerings were down 0.2%.
The fund can be volatile, however. After returning 70.6% in 1999, it posted losses in each of the next three years. Also, expenses are high. The fund’s expense ratio is 2.1%, versus 1.81% for its peers. The AIM fund’s expense ratio includes a 0.5% 12b-1 fee.
The Full Interview:
Why should Americans look beyond their own borders for investments?
To start, they can diversify their portfolios, because most stocks trade on exchanges outside the United States, says Jason Holzer, who helps run the AIM Global Aggressive Growth Fund. Secondly, foreign stocks feature better valuations than domestic ones these days, he says.
“We just feel that there are tremendous growth opportunities outside the U.S.,” Holzer says.
The fund can and does buy companies headquartered in this country. But regardless of where they’re based, they have to be more than a bit profitable to find a home in the portfolio.
“We haven’t set any hard and fast limits, but in the main, these are pretty aggressively growing companies,” co-portfolio manager Barrett Sides says of the fund’s holdings. The group currently sports earnings that are increasing by about 20% annually, he says.
Impressive bottom lines won’t necessarily pique the managers’ interest, though. They need to be confident that growth rates can accelerate and be sustained over time. They also keep an eye out for things like analysts’ estimates that get revised upwards, and results that exceed those projections. Solid margins and returns on equity and invested capital appear on the managers’ checklist, too, along with strong cash flow and balance sheets.
“Because it’s sort of a momentum-based portfolio, we might have a willingness to pay slightly higher multiples for good growers that we think have a chance and a likelihood to beat the market’s expectations,” Sides says. “But we’re certainly mindful of not overpaying for growth.”
The fund’s three portfolio managers have separate regional responsibilities. James Birdsall focuses on the U.S., Holzer concentrates on Europe and Canada, and Sides follows Asian and South American stocks.
About 10% of the fund’s shelf space is devoted to large companies — those with market caps of more than $12 billion. But the managers prefer to focus on small-to-mid-sized companies because they are less widely followed by analysts. Stocks like these can take off when brokerage houses begin following and recommending them.