Cheaper, faster growing and higher quality than the rest of the market. Those are the qualities that outperforming portfolio manager Jordan Cvetanovski has been looking for in stocks for the past nearly 20 years. And the results have proven consistent throughout the global financial crisis, the era of zero interest rates – and now high interest rates. “Throughout my career I’ve managed several different funds and they all tended to have a very similar way of performing … and the reason for that is that when we start a fund, we make sure that the fund is cheaper than.” the market, is growing faster than the market and is better quality than the market,” he told CNBC Pro last week. From its inception in 2022 to May 31, its Pella Global Generations Fund has returned nearly 20%, outperforming its benchmark – the MSCI ACWI (MSCI’s Leading Global Equity Index) – by 7%. When he managed the Pengana International Equities Fund at Australian fund management company Pengana Capital Group between 2015 and 2021, this fund returned 12.1% annually, outperforming the same benchmark by 2.1% per year. French asset management firm Carmignac’s Carmignac Grande Europe Fund returned nearly 16% between 2006 and 2010, outperforming its benchmark, the Euro Stoxx Index, by a whopping 27.3% over that period. Between 2011 and 2014 he managed his own family’s fortune. “Obsessed” and “disciplined” Cvetanovski said he’s “very obsessed and…disciplined” when it comes to looking at valuations, which didn’t worry many investors in the era of zero interest rates. “Our way of valuing companies is the return on free cash flow,” he said, adding that he avoids metrics like accounting profit because there are “too many tricks.” “We don’t generally get into crowded stocks,” he added. “Because they are expensive. This gives us a very differentiated profile over time. This allows us to outperform over the long term.” While he’s fine with underperforming between three and nine months, otherwise he strives to be consistently near the top. “So if you were to marry a growth fund and a value fund and put them both together, the baby would be what we do,” he said. As an investor, Cvetanovski, who is based in Sydney, Australia, said he only invests in his own 34-stock fund, the Pella Global Generations Fund. Any extra money he has goes back into Pella Funds, the company he started in 2021. “To me, it makes perfect sense to invest my money in these 30 quality companies that will continue to grow over the next five years no matter what,” he said. These are his fund’s top holdings — 12% of which is in cash — as of May 31: 3i Group, Adobe, Alphabet, ASML, IQVIA, JD Sports Fashion, Marsh & McLennan, Novo Nordisk, and UnitedHealth. Investing “isn’t going to be as easy as it used to be,” Cvetanovski said, adding that his investment methodology has remained “exactly the same” over the years. “The methodology is the same. Everything I do I went through before the global financial crisis…after the global financial crisis, the low interest rate environment, nothing has changed. And I’m very happy with the way we’re investing,” he said. But he said it “won’t be as easy as it has been for the last decade” when “they say, ‘Just buy stocks because interest rates are at zero.'” Still, he said he still has most of his money into stocks because he believes there is still growth and good valuations out there. “I think there’s still performance if you just avoid looking at the top 7 stocks,” he said, referring to the seven megacap tech stocks that made up the S&D’s returns. P 500 have dominated for long stretches of this year. “Everyone owns them. It’s time to really do something and find other companies.” “Best Place to Invest” So what’s the cheaper way to get into growth? Cvetanovski cited the electric vehicle industry as an example. “Why would you want to buy Tesla, which is extremely overvalued right now, when you can play in the EV sector by buying something much cheaper, like copper and lithium… or a battery business,” he said. “So if Tesla is successful, if electric vehicles are successful, you don’t have to pay, you can make a lot more money if you own something a lot cheaper now, and it’s in copper,” he added, saying there’s a lot of copper out there required for the transition to electric vehicles and the switch to renewable energy. “We believe commodities are the best place to invest right now,” he said. He added that China is currently quite cheap and attracted by electric vehicle companies. He said US-listed companies are more expensive than “equivalent quality” companies in Europe, where he believes they have more value. However, when it comes to ethical investing, Cvetanovski does not seek profit at all costs. He said he avoids industries he sees as harmful and stays away from arms and tobacco companies – including fast fashion. “I really don’t like some of these trends because I think they’re very harmful. So I think the world needs to go back to consuming less, but consuming quality things that last longer,” he said. Compliance with sustainability criteria is one of the goals of the Pella Global Generations Fund. That means excluding companies from the so-called harmful industries – which include casinos and alcohol – and meeting carbon intensity targets. “We believe that over the long term, more and more managers will manage their funds in a way that takes a company’s approach to ESG into account,” he added.
