By Philip van Doorn, MarketWatch
Alex Ely, manager of the $1.9 billion Delaware Smid Cap Growth Fund, says disruptive companies that have taken market share in the coronavirus crisis will continue to do well because they’re fundamentally “better, cheaper, faster.”
“We invest in disruptions,” Ely said in an interview April 28. “They are technologically induced or induced by innovation. When that foundational change happens, there is a secular change in that industry for years to come, sometimes decades to come.”
The advantage of this approach is that the forces driving change are so strong that they continue or are even enhanced by economic upheaval.
“Yes, it matters that there is a crisis, but over the long run, it doesn’t matter what happens. These things will continue on. A young person is not going back to a bank branch,” he said.
Trends and examples of stocks
Here are innovation trends and seven stocks that the Delaware Smid Cap Growth Fund /zigman2/quotes/200336916/realtime DFCIX -2.52% owns. “Smid” cap refers to small- and mid-cap. The portfolio is concentrated, with only 35 stocks.
Virtual health care
The Delaware Smid Cap Growth Fund holds Teladoc Health /zigman2/quotes/207420252/composite TDOC -2.23% , which Ely called “the leading telemedicine company in the market today, in terms of size and the number of patients.” On April 14, Teladoc previewed its first-quarter results and said it was providing 20,000 virtual medical visits a day, which was a 100% increase from the first week of March.
In addition to companies that facilitate remote visits (video conferences) with medical professionals, “there are also companies that will do diagnostics out of your home, or track insulin, blood pressure, heart beat rate, etc., all remotely and more accurately than you would with a one-time analysis from a doctor in a doctor’s office,” Ely said.
One example of a company providing this type of service is iRhythm Technologies /zigman2/quotes/208179139/composite IRTC +2.32% , which according to Ely “has the best technology for monitoring your heart.” IRhythm uses patches to monitor and collect data to determine whether you have an irregular heartbeat. This allows a physician to monitor millions of heartbeats continually, providing a larger and more accurate data set than traditional monitoring techniques.
Communications and software as a service
RingCentral /zigman2/quotes/204236620/composite RNG -1.00% provides unified communication services to companies, including voice, video, text messaging and social media, across all types of devices. The company’s software-as-a-service model allows integration with various custom and third-party applications.
Everbridge /zigman2/quotes/202832262/composite EVBG -5.17% provides critical event-management services, coordinating emergency messages across various platforms for various government entities and companies.
Okta /zigman2/quotes/210420951/composite OKTA -1.56% provides could-based identity authentication software for enhanced, convenient network security.