Q2 2021 Putnam Growth Opportunities Fund Q&A
- For the quarter, large-cap growth stocks outperformed their value counterparts.
- Our newest growth theme, “the experience economy,” is based on a growing preference for experiences over material possessions.
- We’ve positioned the portfolio to benefit from what we view as lasting economic shifts from the past 16 months.
How did growth stocks and the fund perform in the second quarter?
For the quarter, large-cap growth stocks outperformed their value counterparts, and the fund slightly underperformed its benchmark.
We are often asked how long we believe the recent style rotation, which has largely favored value stocks, will last. However, calling the direction of the equity market or style leadership is not our goal in managing the portfolio. In periods of weakness for growth stocks, we seek to be opportunistic, taking advantage of more attractive prices for our high-conviction ideas and stocks we believe offer durable long-term growth potential. At the same time, we have consolidated some portfolio positions, trimming or eliminating holdings that no longer constitute high-conviction ideas or whose valuation characteristics are less attractive.
Your theme-based approach is a distinct feature of the fund, and you have a new theme for the portfolio. Could you tell us about that?
Our thematic approach is a critical part of our investment process. Together with a team of analysts, we examine global trends as well as problems and potential solutions. From this analysis, we identify which themes could drive sustained growth for businesses over a multiyear time horizon.
Our newest growth theme is “the experience economy.” It is based on a growing preference for experiences over material possessions. An increasing number of consumers are seeking to spend their money on live entertainment and events, luxury travel and destinations, or interactions within social communities. We have observed this trend among younger consumers for many years, but we believe the appeal of experiences has become more widespread after the pandemic lockdowns and isolation in 2020. This growing demand, combined with higher levels of personal savings, should help a number of businesses in our portfolio grow at above-market rates for an extended period of time.
As we enter the second half of 2021, what is your outlook?
We see many opportunities as we look ahead, and we’ve positioned the portfolio to benefit from what we view as lasting economic shifts from the past 16 months. We are not looking for companies that grow very quickly for a short period of time. Instead, we prioritize those businesses that are competitively advantaged and are able to grow across a cycle, regardless of the economic backdrop. Growth companies are largely responsible for driving innovation in the economy, and we believe many examples can be found in our portfolio, particularly in the technology, healthcare, consumer, and industrial sectors.
We are also mindful of the vulnerabilities for the companies we own. A key component of our investment process is to analyze how businesses have performed through difficult times in the past. This is part of the conversations we have with analysts on our team as well as the discussions we have with management teams of the companies themselves.
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