Fund manager Q&A: Chasing growth in a low-growth environment

By Sarah Skidmore Sell
AP Business Writer

The stock market is at record highs, and that is making it tougher for investors to find big gains.

Voya Large Cap Growth Fund focuses on big companies. Its top ten holdings are all household names like Apple, Home Depot, Facebook and Costco. The fund says it aims to find that “sweet spot where business momentum, valuation and market recognition intersect.”

Michael Pytosh, head of equities at Voya Investment Management and one the fund’s portfolio managers, spoke with The Associated Press about investing strategies for growth in a low-growth world. Answers have been edited for length and clarity.

Q. Given the slow growth in both markets and the global economy right now, what do you see as the primary appeal of large cap funds?

A. Growth is harder to come by today than in many times in my career, and I’ve been doing this for 30 years. But there’s still good growth out there. There’s always changes in regulation, changes in market share and innovation.

This environment is a little different than normal because, in part, investors are looking for yield. There’s a lot of room between the high growth and the yielding parts of the universe. For moderate growth companies, they are trading at reasonable levels and there are opportunities there. It’s all relative gain at the end of the day.

Q. Is growth overvalued right now? There seems to be a lot of demand chasing very little supply.

A. In short, yes. Particularly at the very high end of the growth spectrum. There is a scarcity. And this is the slowest growth period I’ve lived through. There is a lot of money searching for growth, so when it happens, people pay for it.

But growth is finite. There is the rare company that grows for 10 or 20 years. Most growth companies only have a growth period of three to five years. You have to be careful, you have to be nimble.
The biggest problem you have as a growth investor is when you stay too long in a stock that grew fast and isn’t growing as fast. You can’t have a portfolio full of stocks that drop like that. There’s no way to counteract it.

Q. A lot of growth has traditionally been in technology, and those companies are highly reliant on markets outside the U.S. What are you keeping your eye on globally?

A. Technology is pretty representative of global markets. More than half of those sales come from outside the U.S. for the big companies. So we are always aware of the economic developments in Europe and China.

But more important than that, for each individual company — if it’s Apple or Google or Facebook or Intel — it’s really what innovations do they have in the pipeline, what’s the available market.

The tech market isn’t as vibrant as it was in the ‘90s, when you were putting PCs on every desk or the 2000s, when cell phones were everywhere. But there are still opportunities with product cycle and innovation.

Q. There are a lot of tech companies creating a lot of stuff out there. It seems tough to stay on top of what is going to be the next big thing. Is it?

A. It’s challenging. You have to have analysts who are very experienced in understanding the evolution of technology and what are the available markets. There’s a lot of innovation out there, but about 98 percent of it is not material. It’s great innovation, but it’s not going to move the needle. We spend a lot of time dissecting that to see what is going to move the needle.