A stock picker in Wall Street's top 1% this year unveils the 4 investment themes he thinks will crush the market in 2019
- Kyle Weaver, who oversees $5 billion as lead manager of the Fidelity Advisor Growth Opportunities Fund, shares the four main themes he thinks will outperform the broader market in 2019.
- Weaver's fund returned 20.35% for the 12 months ending in November, putting it in the 99% percentile relative to competitors.
When it comes to picking stocks to put in his portfolio, Kyle Weaver isn't particularly interested in companies that can be easily influenced by external factors like trade or oil prices.
Weaver, who oversees $5 billion as lead manager of the Fidelity Advisor Growth Opportunities Fund, instead prefers to identify and buy shares in companies that can stand on their own two feet, regardless of macro conditions.
He believes this simplifies the investment process by eliminating the types of exogenous drivers that can hurt share prices, regardless of a company's underlying quality. This helps him avoid pouring money into companies that appear strong, but are actually vulnerable to uncontrollable forces.
But that's just half the battle. Weaver is also on the hunt for high-growth stocks that the can buy at bargain prices.
He describes this as a "deep value" approach, meaning he looks for companies trading at inexpensive valuations right now - perhaps at two to three times earnings - that also possess massive upside over a 5- to 10-year period.
Read more: We interviewed Wall Street's 8 top-performing investors to get their best ideas for 2019
Ideally, the strategy results in "a portfolio that's filled with idiosyncratic, resilient business models that have good long-term growth potential and are underappreciated by the market," Weaver told Business Insider in a recent interview.
Based on Weaver's performance over the past year, it's safe to say that this method is working. The Fidelity Advisor Growth Opportunities Fund returned 20.35% over the 12 months ending in November, according to rankings compiled by Kiplinger. That puts it in the 99th percentile for the period, Bloomberg data show.
Another facet of Weaver's methodology involves picking out broad themes, rather than loading up on specific sectors. It's an approach that helps him achieve diversification and fulfill his desire for idiosyncratic holdings.
Weaver shared with Business Insider the four main themes that are informing his stock picks for 2019. They are as follows. All quotes attributable to Weaver.
(1) Battery technology
"The cost of storing energy has been coming down for years, but it's accelerated with all the investment that's gone into battery technology for electric vehicles. The ramifications of that are not only in the electric car market, but also in the ability to store solar energy and improve the grid."
(2) The fall of "Big Tobacco"
"Big tobacco will be disrupted by better, cleaner, cheaper alternatives. The big tobacco stocks have been good growth stories and dividend payers for many years, but there are some new entrants now, and that genie is out of the bottle."
(3) The movement of software to the cloud
"Software as a service continues to be a very strong trend. Some of the companies that are speculative growth stories are now the clear category killers, and have become mega-cap stocks with operating leverage and real cash flow."
(4) Chinese internet giants
"Chinese internet giants, and the dynamics of that market - where arguably their bigger franchises are more dominant than Google and Facebook - makes that an interest place to look for opportunities."
Click here to read our full story, featuring exclusive interviews with Wall Street's top 8 fund managers