US-focused exchange-traded funds (ETFs) and passive strategies have grown in popularity over the past decade, but this trend has created concentration risk since so many investors are now crowded in US stocks and the mega-cap tech names in particular.

For investors seeking differentiated exposure to the world’s largest, most liquid stock market, then a vehicle that does not mimic any index and offers a play on some of the most exciting and innovative growth companies across the pond merits consideration.

One collective that has caught Shares’ eye is VT Tyndall North American Fund (BYPZY05). First the negatives. The fund is still very small, with just £18.9 million in assets at last count, and ranks fourth quartile over five years with its 63.83% cumulative total return lagging the IA North America Sector’s 97.61% haul. And yet, the portfolio’s more recent performance is encouraging, with VT Tyndall North American ranked first quartile over six months with a 13.55% gain, comfortably ahead of the sector’s 8.35% return.

FLYWHEEL SPINNING FASTER

A unique growth story held in the fund is the innovative SharkNinja (SN:NYSE), the cleaning and cooking appliance maker behind the Shark and Ninja brands whose innovation flywheel is spinning faster.

A 2023 IPO, SharkNinja has established a track record of beating Wall Street estimates and is ‘constantly finding products which are either out of patent or need to be improved. It is quite a differentiated story that most other long-only managers would not have heard of’, says Wintle. Sharing his bullishness on the name is Jefferies, which believes SharkNinja is well positioned to grow market share across categories and geographies thanks to its ‘best-in-class brands and management team. Its global TAM (total addressable market) is large while penetration remains low, and the company’s proven international expansion playbooks keeps gaining speed’, argues the broker.

TIME TO GET ACTIVE

This high-conviction, long-only portfolio is managed by a true active manager in Felix Wintle, who dares to differ from the index and starts with a top-down analytical process to determine where we are in the cycle. More specifically, Wintle applies a ‘split approach’ to his portfolio: core stock selection based on finding long-term thematic winners and tactical selection driven by the outlook for growth and inflation. An admirer of the late great American broker and investor William O’Neil – author of How To Make Money In Stocks and one of the first investors to incorporate computers into his research, Wintle thinks about the US differently from rival long-only peers.

Not content to follow the herd, Wintle runs a multi-cap portfolio in the belief there is ‘so much more to play for in the US in terms of trying to get those names right and increasing the probability of owning stock picks that are going to work. I do the fundamental work, but also marry that with a macro appreciation and a technical view’, he informs Shares.

Wintle puts in the hours poring over charts and identifying trends because it is so important to be ‘in synch’ with the market, to find stocks the market already wants to own that are in relative uptrends. ‘If we like the stock fundamentals, the macro backdrop is supportive of taking equity risk and we are buying something that the market already wants to own, that massively increases the probability of that fundamental stock pick being right,’ he explains.

Valuation forms part of his toolkit, but Wintle argues valuations can be inaccurate and subjective. ‘I’d much rather find a stock which is going through a growth phase that is already performing and pay a bit more for it, because that works much better than saying “I can’t possibly own it because it trades on 20 times earnings”.’

IPOs and SPIN-OFFS

In contrast to many other managers, who look for a long-term track record on the public markets before they invest, Wintle is a fan of IPOs (initial public offerings) and spin-offs. This aligns with his focus on new leaders and newness. ‘When you look at where the big winners in stock market returns come from, a lot of them are new companies, IPOs, companies with new products, because typically they are the beginning of their growth trajectory and if those products take hold, they can be absolute monsters. I have an issue with this idea that the best companies are the ones that have been around for 140 years.’

Also known as de-mergers, he says ‘spin-offs are almost always a really good source of alpha and new ideas, because most of these businesses get lost in the conglomerates. When you break them up, you get proper management in, proper funding, a proper vision and away you go.’

SHUNTING HIGH & LOW

As at 28 February, VT Tyndall North American owned 31 names with top 10 holdings spanning giants such as Amazon (AMZN:NASDAQ), Costco (COST:NASDAQ) and Goldman Sachs (GS:NYSE), as well as payments company Fiserv (FI:NYSE) and Axon Enterprise (AXON:NASDAQ).

The manager is excited about the potential of the latter, which sells tasers, body cameras and software systems to local law enforcement agencies and has morphed into ‘a real practical AI story. The bodycam videos the arrest and there is an AI capability that writes the report for the police officer afterwards. From an investment point of view that’s super interesting because Axon is going from a hardware margin profile, the tasers and bodycams, to a software margin profile, which is about 20 percentage points of uplift,’ he enthuses.

Illustrating the diversification within the fund, holdings outside the top 10 span the likes of fantasy sports betting firm DraftKings (DKNG:NASDAQ) to trading platform Robinhood (HOOD:NASDAQ), the latter giving investors some exposure to crypto.

Wintle tells Shares he is loathe to own any ‘filler stocks’ and while the fund does own some mega caps, his unwavering focus is on finding the next big growth story. ‘Generally, I generate alpha by finding the new leaders. Companies with strong fundamentals, continued growth potential, and sector outperformance. And typically, the new leadership stocks in the market tend to be small and mid caps. If you are going to generate alpha, you’ve got to be active, because only 4% of stocks in the US actually account for alpha.’

NO ROOM FOR NVIDIA?

One notable absentee from the portfolio is chips champ Nvidia (NVDA:NASDAQ). ‘The reason we don’t own Nvidia right now is everything is a cycle, including the best ideas you’ve ever had in the world,’ explains Wintle. ‘There’s a rate of change deceleration in Nvidia’s revenue growth and the market doesn’t like that. For all its genius, Nvidia is still a cyclical stock. The time to own it was 18 months to two years ago when it was hockey-sticking up, but now it is beginning to crest.’

AVOIDING THE ‘ROUND TRIP’

VT Tyndall North American’s core names tend to be in sectors where there’s pricing power and innovation such as consumer discretionary, healthcare, technology and industrials, and he is seeing lots of innovation in the consumer discretionary sector right now.

That said, he recently sold two restaurant stocks which had been big contributors to performance, namely Cava (CAVA:NYSE) and Brinker (EAT:NYSE), feeling the time was right to bank some profits. Mediterranean-inspired fast-casual restaurant Cava, which joined the stock market in 2023, was sold ahead of a fourth quarter earnings miss (25 February) and that turned out to be a good decision. ‘Cava is going through a nice growth trajectory, but we feel Wall Street has got way ahead of itself in terms of expectations,’ observes Wintle.

Fast-food restaurant chain Brinker, the Chili’s owner which flies under the radar as better known companies like McDonalds (MCD:NYSE), Starbucks (SBUX:NASDAQ) and Chipotle (CMG:NYSE), is growing earnings at a rapid clip, taking share from competitors and has ‘stolen a march on the value proposition in America. We sold it because we wanted to take some profits, but I’d be happy to buy back in again if the opportunity arises. If something has done really well, I don’t want to “round-trip”” it. One of the mistakes that fund managers make is falling in love with stocks, but we are quite aggressive in terms of selling on the up.’

A consumer stock Wintle recently sold is the once high-flying fitness and energy drinks company Celsius (CELH:NASDAQ). Monster Beverage (MNST:NASDAQ) was one of the most successful stocks in the S&P 500 ever, so when these growth names really get it right, it can be absolutely transformational,’ he explains. ‘Admittedly Celsius was a one product story, but it was a really successful investment for us, but I did round-trip this one and its painful.’ Celsius’ recent $1.8 billion acquisition of rival energy drink brand Alani Nu makes Wintle think he was right to exit the position. ‘If you’ve got the hottest product in energy drinks, you don’t need to go an buy another product,’ he cautions.

A new consumer name Wintle has added to the portfolio is Planet Fitness (PLNT:NYSE), the largest budget gyms owner in the US whose new CEO has wasted no time in turning around the fundamentals of the business. ‘A new pricing cycle around their black card membership and an expansion plan make for a compelling growth story,’ Wintle insists. Jefferies shares his enthusiasm for the name, having made Planet Fitness, which it describes as ‘The Walmart of Gyms’ with a new ‘laser-focused’ CEO, its top pick for 2025 with a $150 price target versus the current $96.9 market price.

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