Just as everyone expected the stock market to ease quietly into the end of 2018, chaos reigned supreme over the final week of the year.
Which is why it’s that much more impressive that Kyle Weaver — who oversees $5 billion as lead manager of the Fidelity Advisor Growth Opportunities Fund— has been able to remain atop rankings of Wall Street fund managers. He was in the 99th percentile through the end of November, and he remained there as of Friday, even following the market’s turbulent December.
It’s no mistake that Weaver stayed relatively insulated from the widespread damage that took stocks by storm. His strategy is built around stable, standalone businesses that are largely immune to macro conditions and negative external forces.
Beyond that, Weaver picks stocks based on what he calls a “deep value” approach. That means he looks for companies trading at inexpensive valuations — perhaps at two to three times earnings — that also possess massive upside over a five- to 10-year period.
To that end, Weaver has shared with Business Insider three stocks he loves right now. They are as follows. All quotes attributable to Weaver.
“What’s amazing about Wayfair is watching someone beating Amazon at its own game. In e-commerce and home furnishings, Wayfair is the 800-pound gorilla. It’s a really big market in the US and Europe, and it’s a very different kind than the books and CDs and groceries that you may think of as Amazon’s core franchise.”
“Wayfair divides its delivery network into small and large parcels. A Wayfair small parcel would be considered a very large one for Amazon. That requires a very different distribution network. These are large packages that are easy to damage and hard to deliver.”
“In some ways they’re following the Amazon playbook by investing in growth and being customer-focused. They own the process end to end, to make the experience better and better. As they do that, it’s been dampening their current levels of profitability but amplifying their long-term earnings power.”
“When dollars and industries move to the internet, market concentration increases. The internet is much more of a winner-takes-most environment. Wayfair is in a nice position as the current largest company in that niche, even though it’s huge.”
The Trade Desk (TTD)
“Usually when you talk about internet advertising, the discussion is dominated by Google and Facebook, who have taken the vast majority of the ad dollars that have flowed to online advertising. What made Trade Desk controversial — and what created opportunity for a stock that was overlooked a year ago — was that there is a lot of internet left out there outside of Google and Facebook.”
“There are a lot of advertisers who really want to figure out how to stop guessing, and start making data-driven insights to make sure their ad dollars aren’t wasted. The Trade Desk was pretty much founded on that vision. It’s founder-led and has been profitable since day one. They’re just extremely customer-focused. One of their biggest innovations wasn’t actually their technology.”
“Instead of trying to disrupt the traditional ad agency model, they aligned with them and became their tool for serving digital advertising to their customers. They built a great tool with great technology, and had the correct vision. It was a unique model. At a time when people were trying to disrupt the ad industry, they kind of enabled it. It’s proven to be a really winning value proposition.”
“They’re still a $400-500 million revenue company in a $700 billion global advertising industry. The fact that they’re taking share in programmatic advertising — which is the fastest-growing part of the online market, which is taking share from the traditional market — gives them a lot of tailwinds to benefit from over the next several years.
American Tower (AMT)
“It kind of proves how boring is beautiful. The tower business model hasn’t changed in the multiple decades it’s existed.”
“The company’s business model is simply to collect rent from telecom carriers that need to put equipment on those towers in order to get signal to their customers. The contracts are 5-10 years long, and they come with 2-3% price increases every year.”
“Each tower is like its own tiny local monopoly. For that area of your neighborhood, there probably isn’t another spot to put that equipment, which gives the tower companies a pretty unique advantage. And nobody wants new towers built in their area.”
“Ten years ago, you could sit back and say wireless data would be a huge demand driver for carriers. Understanding the business model for the tower stocks, you could look out and see it was only trading at 3 to 4 times earnings 8 to 10 years out, and that’s been what’s come to pass. The stock is $160 instead of $30 now as it’s traveled up with earnings growth.”
“AMT has differentiated itself from other tower companies in the US by investing abroad in emerging markets like India and Nigeria, where wireless data growth is on an even steeper growth trajectory. That comes with some risks, but they’re a very long-term focused company. They’re aligned with us as long-term shareholders.”