Alex Motola, manager of the Thornburg Core Growth Fund, said he made a mistake nine months ago by selling his Google stake. He recovered in time...
Alex Motola, manager of the Thornburg Core Growth Fund, said he made a mistake nine months ago by selling his Google stake. He recovered in time to profit from the stock’s recent rise.
Motola bought 11,000 shares of Google when the Internet company went public in August and sold them after the stock surged 50 percent. Four months later, after missing a rally, he started buying shares again at about $190 each.
“We sold because we thought there was a fair chance that expectations for earnings were relatively inflated,” Motola said. “We were wrong. They’re the No. 1 player in a market that’s growing very fast.”
Google’s climb helped make Motola’s $111 million fund the third-best performer among 247 competing mutual funds tracked by Bloomberg in the past 12 months, as of June 29, that focus on companies generating above-average earnings growth.
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A class leader
The Thornburg fund rose 23.5 percent in the period. Only the Fairholme Fund, up 25.9 percent, and the Hennessy Focus 30 Fund, up 24.6 percent, produced higher returns, data compiled by Bloomberg show.
Google, the most-used Internet search engine, was Motola’s biggest holding as of May 31, with 17,100 shares accounting for 4.3 percent of the fund.
Motola’s second-biggest investment was Apple Computer, maker of the popular iPod music player.
He purchased 80,900 shares in the first quarter, missing last year’s rally when the stock more than tripled.
Google’s results have exceeded analyst estimates in each of its first three quarters as a publicly traded company. That makes it a riskier-than-normal investment, said Clay Moran, an analyst at Stanford Group in Boca Raton, Fla.
“It’s a leap of faith to buy the stock,” said Moran, who has a “hold” rating on Google shares and doesn’t own any.
“The market reflects expectations of continued stellar performance. Anything less could be cause for a significant pullback.”
Motola sees it differently after selling the stock at $130 in September and missing out on the next $60 increase.
“We went back in when we became more comfortable with management,” Motola said.
The Thornburg fund holds about 40 stocks and invests in companies of all sizes.
Motola seeks industry leaders that are generating consistent earnings growth.
His other top holdings include WellPoint, the largest U.S. health-insurance provider, and Tempur-Pedic International, which makes luxury mattresses and pillows.
Motola bought Google shares in the first quarter because he views the company as the leader in Internet search.
His view is shared by John Calamos Sr., chief executive of Calamos Asset Management in Naperville, Ill., whose $15 billion Calamos Growth Fund outperformed the Standard & Poor’s 500 Index in each of the past six years.
He bought 841,400 Google shares in the first quarter.
He also owns Yahoo!, Amazon.com and eBay.
“These companies on the Net are very interesting longer-term plays,” Calamos said. “You have to be careful not to sell them too soon.”