Equities Blog

Concentrating on Sustainable Growth

16 September 2020

2 min read

James T. Tierney, Jr.| Chief Investment Officer—Concentrated US Growth

Portfolio Perspectives: Businesses that Stand the Test of Time

As stock markets cope with continued volatility and slowing global economic growth resulting from the COVID-19 pandemic, investors face a significant challenge in seeking sustainable returns from equities.

We believe the key is to identify companies with business models that can stand the test of time and reliably deliver persistent growth through changing market cycles. Quality companies that offer genuine long-term growth potential are fewer in number. That’s why we focus our efforts on knowing as much as possible about a small number of companies.

Our concentrated approach is defined and differentiated by our long-term outlook. Many investors are guided by a plethora of estimates for the next quarter and the remainder of the year. But looking two to five years ahead, there are much fewer estimates in the market. In our search for companies with long-term potential, we seek those that can consistently deliver in excess of 10% earnings growth for a full five-year period and that are trading at a discount to their expected future valuations.

Fund Focus

ES AllianceBernstein Concentrated US Equity Fund

Seeking Consistent Earnings Growth from High Quality US Companies to Drive Long-term Returns

Capital at Risk

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Key to Successful Growth Investing

Beating the Fade

Past performance does not guarantee future results.
Historical data for informational purposes only. Universe consists of the top 1,000 companies by market cap each year from 1979 through 2018 with annual rebalancing.
As of December 31, 2019.
Source: Center for Research in Security Prices, FactSet, MSCI, S&P Compustat and AllianceBernstein(AB)

Earnings potential is only part of the story. As quality growth investors, we’re also hunting for companies with great management teams that demonstrate solid governance credentials, strong balance sheets and non-cyclical businesses with high barriers to entry, or real moats around them to protect against competitive threats.

Identifying High-Quality Growth Companies

For illustrative purposes only. There can be no assurance that any investment objectives will be achieved.

After finding candidates that meet these strict criteria, we ask another crucial question that narrows down our selection into an even higher-conviction assessment: “do we want to be in this business, with these people?” The answer must be ‘yes’ to both parts of that question for a candidate to be chosen for inclusion in our portfolios. Less concentrated funds often will compromise on such stringent selection criteria in order to meet diversification requirements.

Robust due diligence combined with our freedom to select only those companies that we believe can offer persistent growth underpins our concentrated investing approach. And it allows us to assemble a collection of attractive, select long-term investments in a portfolio with effective risk control.

The value of an investment can go down as well as up and investors may not get back the full amount they invested. The views expressed herein do not constitute research, investment advice or trade recommendations and do not necessarily represent the views of all AB portfolio-management teams and are subject to revision over time. AllianceBernstein Limited is authorised and regulated by the Financial Conduct Authority in the United Kingdom.

About the Authors

James T. Tierney, Jr.

James T. Tierney, Jr. is Chief Investment Officer of Concentrated US Growth. Prior to joining AB in December 2013, he was CIO at W.P. Stewart & Co. Tierney began his career in 1988 in equity research at J.P. Morgan Investment Management, where he analyzed entertainment, healthcare and finance companies. He left J.P. Morgan in 1990 to pursue an MBA and returned in 1992 as a senior analyst covering energy, transportation, media and entertainment. Tierney joined W.P. Stewart in 2000. He holds a BS in finance from Providence College and an MBA from Columbia Business School at Columbia University. Location: New York

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