Morgan Stanley's Dennis Lynch
The stock market had a great 2013, but your Focus Growth Fund way outperformed. What's your secret?
We really take a long-term view, which is something that's often talked about but hard to implement because of what Warren Buffett calls the institutional imperative -- the pressure that comes from being long term in a world that is short-term-oriented. We also are very focused on looking for unique companies with strong competitive advantages. If you're going to own stocks for many years, as we do, you'd better worry about how those companies are differentiated.
And as a growth investor, you don't worry too much about valuation?
Not exactly. I don't really like the whole growth/value distinction. We get labeled as growth investors, but all good investing is trying to find companies whose prices don't reflect their potential. It just happens that we tend to look at the part of the market that has higher growth rates, and those companies often appear expensive based on conventional metrics like P/E. It's true that, on average, high-multiple stocks don't do as well as low-multiple stocks. But we're not buying all those companies -- just ones we think actually deserve those multiples and then some.
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