"Street Critique"- Mani Govil, Portfolio Manager of the RS Large Cap Alpha Fund
Wednesday, December 17, 2008JEFF YASTINE: Tonight's "Street Critique" guest is a long-term bull and says ugly markets like these come with great opportunities for long-term investors. He's Mani Govil, portfolio manager of the RS Large Cap Alpha Fund. Mani welcome to NIGHTLY BUSINESS REPORT.
MANI GOVIL, RS LARGE CAP ALPHA FUND: Thank you, Jeff. Happy holidays to you.
YASTINE: Same here. Thank you. We'll talk about your investment philosophy in a moment, but what is your take on the markets we're seeing today?
GOVIL: Jeff, if you have a long-term time horizon next three to five years, these are very good prices for good companies, companies that have good economic and competitive characteristics. It's a wonderful time to be an investor if you're a long-term investor.
YASTINE: You've managed the RS Large Cap Alpha Fund since around mid 2005. You've done well but of course the fund, like everybody these days, has suffered with these markets. Your fund is down about 31 percent versus the S&P being down about 38 percent. You use sort of a Warren Buffett approach in picking stocks. Give us a sense of the categories and which stocks you're talking about here.
GOVIL: We focus on competitive advantage. And the one form would be sustainable competive advantage which Warren Buffett would call as molds. And I'll give you an example here, Abbot (ABT). This is a company that has patents, good product pipeline, gaining market share across most segments, very durable, competitive advantage that we think is sustainable.
YASTINE: You have three other categories. What is the third one here?
GOVIL: OK. The next category is a better competitive advantage. We call it (INAUDIBLE) keepers. These are companies that not only have sustainable competitive advantage, but also have a very high degree of stickiness on the part of the consumer, their customer. An example would be Enterprise Product Partners (EPD). This is literally a toll road (ph) for oil and gas and oil and gas products.
YASTINE: This is a pipeline company in other words.
GOVIL: That is correct.
YASTINE: Give us your next pick here.
GOVIL: Next in this category we call it superior execution. And these are companies that tend to do well in all economic environments. They just out-execute their competition. An example would be McDonald's (MCD). When the economy is doing well, they outperform other fast food restaurants. You can look at any matrix, same-store sales, return on invested capital, so on and so forth and when the economy is soft as it is right now, they still continue to outperform their competition basically taking market share away.
YASTINE: Mani, very quickly, a final fourth one here.
GOVIL: We call this a future core. These are tomorrow's (INAUDIBLE) keepers. An example would be Google (GOOG). Their market share a few years ago in search was 29 percent. The latest numbers that were released showed 61 percent. And if you buy our research and our story, we think it can get to about 90 percent in a few years. That will make it a keeper.
YASTINE: Mani, any stocks to disclose here, ownership, et cetera?
GOVIL: These are all owned in the fund and a good part of my liquid network is in the fund. I do not own these directly but through the fund I own a fair amount.
YASTINE: All right, Mani. Thank you for coming on the program. Our guest Mani Govil of the RS Large Cap Alpha Fund.
GOVIL: Thank you.
