By Philip van Doorn
The age-old battle between supporters of either growth or value investing styles has ramped up. But Mitch Rubin of RiverPark Funds says any movement toward value will be short-lived.
Rubin, in an interview, said successful portfolio allocation has little to do with economic factors, such as government spending, “and has everything to do with the forces of creative destruction brought forward” by the COVID-19 pandemic.
“There are companies that are either new or have pivoted and are well-positioned to dominate a digital-first world,” he said. “And there are those that have failed to adapt and will face severe secular headwinds.”
Rubin added that some companies that have fared especially well during the pandemic lockdown won’t continue growing quickly for long after life returns to normal.
Rubin is chief investment officer of RiverPark, which is based in New York and has $3.8 billion in assets under management. He manages the RiverPark Long/Short Opportunity Fund, which is rated five stars (the highest) by Morningstar. The fund was profiled in this article in April 2020. Its objective is long-term growth, with downside and volatility tempered by what Rubin calls “tactical” short positions. You can see more about its performance below.
Shorting a stock is borrowing its shares and selling them immediately, with the expectation of buying them back after they decline, returning them to the lender and pocketing the difference.
Rubin said he avoids betting against stocks that are already heavily shorted by other investors. This protected the fund from losses suffered by some institutional investors earlier this year when there was extraordinary interest in bidding up shares of GameStop Corp. /zigman2/quotes/203755179/composite GME +11.37% and other stocks that had been out of favor.
Two examples of long investments Rubin named were Snap Inc. /zigman2/quotes/205087158/composite SNAP +1.08% and Pinterest Inc. /zigman2/quotes/211319641/composite PINS -0.26% . “To us, they are both profitable, both have large cash balances and both are growing at extraordinary rates with expanding margins,” he said.
Rubin pointed to “dramatically” growing user bases at both companies. He said there are long-term opportunities because of the potential for increasing advertising revenue.
“Both Snapchat and Pinterest are monetized [through advertising prices] at a discount to Facebook, which is at a discount to Google, which is at a discount to all other forms of media, such as television and newspaper adds,” he said.
Other long positions include Exact Sciences Corp. /zigman2/quotes/206653925/composite EXAS +0.13% , Illumina Inc. /zigman2/quotes/203509482/composite ILMN +0.91% and DexCom Inc. /zigman2/quotes/201324608/composite DXCM +4.04% .
“They are all innovative health-care companies that detect and manage diseases that are massively prevalent in society,” Rubin said.
Some of Rubin’s long positions were taken because of beaten-down prices. These included Charles Schwab Corp. /zigman2/quotes/201281754/composite SCHW +0.07% , UnitedHealth Group Inc. /zigman2/quotes/210453738/composite UNH +0.92% and Walt Disney Co. /zigman2/quotes/203410047/composite DIS +0.43% .
“The opportunity, if you were patient, was to buy great businesses on sale,” he said. In particular, he was “very excited about the launch of Disney+,” a rival to Netflix /zigman2/quotes/202353025/composite NFLX +0.60% .
Rubin has short positions in Peloton Interactive Inc. /zigman2/quotes/208035743/composite PTON +6.08% and Zoom Video Communications Inc. /zigman2/quotes/211319643/composite ZM +3.56% , two companies whose shares have soared during the pandemic. Peloton’s combination of fitness equipment and subscriptions for streaming exercise classes has been a perfect fit for a populace stuck at home, while Zoom has become the standard for corporate video conferences.