By Philip van Doorn, MarketWatch
Amy Zhang of Fred Alger Management owns three innovative companies in her funds that she expects to be “part of the solution” to the coronavirus crisis, as they help with diagnostic testing, mass notification and telehealth services.
Zhang has managed the Alger Small Cap Focus Fund /zigman2/quotes/207263247/realtime AOFAX +1.24% since February 2015 and the Alger Mid Cap Focus Fund /zigman2/quotes/212840468/realtime AFOIX +1.30% since it was established in June 2019.
She has long followed a concentrated strategy of selecting innovative companies with strong balance sheets and excellent growth prospects. This has served both funds well during the coronavirus market crash, as you can see below. (The Alger Small Cap Focus Fund is “soft-closed,” meaning only current investors may buy more shares.)
‘Part of the solution’
During an interview March 18, Zhang said the health-care sector is “much more defensive” than the technology sector.
“Technology has slowed down a lot,” and “industrials are even more economically sensitive,” she said. She emphasized the importance of careful stock selection, saying that health care “has the most dispersion between winners and losers.”
Here are three stocks she owns that she expects to perform well over the long term as the companies develop products and services to help not only with the corinavirus crisis, but with enhanced approaches to the management of other epidemics.
Quidel /zigman2/quotes/209081561/composite QDEL +0.99% makes rapid diagnostic testing kits in four categories: rapid immunoassay, cardiac immunoassay, specialized diagnostics and molecular diagnostics. On March 17, the company received emergency use authorization from the Food and Drug Administration for its Lyra SARS-CoV-2 Assay — a testing kit “for the qualitative detection of nucleic acid from SARS-CoV-2 in nasopharyngeal or oropharyngeal swab specimens from patients suspected of COVID-19 by their health-care provider.”
Flu testing has long been a major product and service focus for Quidel. Zhang said she has invested in Quidel for 10 years, and she believes the coronavirus outbreak will make people more interested in flu testing. The Centers for Disease Control estimates there have been between 12,000 and 61,000 deaths from influenza annually in the U.S. since 2010.
Zhang expects Quidel will be successful in deploying a point-of-care combination test for influenza A and B and the COVID-19 coronavirus “for the next flu season” this fall, “with a 20-minute result.”
“It is in their wheelhouse,” she said.
Quidel was the largest holding of the Alger Mid Cap Focus fund as of Feb. 29. The stock has returned 22% this year through March 18, compared with a 28% decline for the Russell Mid Cap Growth Index /zigman2/quotes/210598134/delayed XX:RMCCG +1.52% and a 37% drop for the Russell 2000 Growth Index /zigman2/quotes/210598133/delayed XX:RUO +1.92% .
Everbridge /zigman2/quotes/202832262/composite EVBG +4.21% was the third-largest holding of the Alger Small Cap Focus Fund as of Feb. 29, being held by Zhang since 2016. This is a software-as-a-service company, which Zhang called “a leader in critical event management,” or CEM. Everbridge provides software used for mass notifications. Automated messages can be sent to help protect people and keep businesses and government agencies running during all sorts of emergencies.
The company says these messages can be sent through over 100 different types of communication devices, and that the systems can “track progress on executing response plans.”
Zhang called Everbridge “the best in class, with the broadest platform,” and said the company had deployed several million messages related to the coronavirus, locally, nationally and globally this year.
“They still have catalysts — With COVID-19, adoption will accelerate. But over long term, we think the company is well-positioned, with other catalysts,” Zhang said.
Everbridge’s shares were up 47% year-to-date through March 18.