Aram Green manages a number of mutual funds for ClearBridge Investments, which handled $184 billion in wealth at the end of the first quarter. His ClearBridge Select Fund has returned 30.9% a year for the five-year period that ended on May 31, which Kiplinger rates as the third-highest of any midsize stock fund.
According to Morningstar data, that translates to a five-year return of 284%. The S&P 500 gained less than half as much over the same span, and his benchmark, the Russell 2000 Growth Total Return Index, climbed 125%.
In 2021, the Select Fund is ahead of 96% of its peers. Green is taking a more focused middle path after trading on tech companies that thrived during lockdowns and then cheap companies that were poised to come back as the COVID-19 pandemic began to fade.
"Some of my best ideas that I find right now ... weren't in the COVID-beneficiary camp, and they weren't in the COVID-impacted companies," he told Insider in an exclusive interview. "They were in the companies that might've been left out of investors running from one side of the boat to the other side of the boat."
He's also taking his focus to a new fund. ClearBridge's Aggressive Growth Fund has beaten its benchmark over the long run, but the nearly 40-year-old fund has consistently been among the bottom 10% in its category in recent years.
Part of the reason, Green said, is that it has large concentrations in companies that have achieved enormous size, like UnitedHealth and Comcast, and can't grow and appreciate at the rate they once did.
"We need to find more UNHs earlier on," he said. "Find these companies earlier when they're small monoline businesses expanding addressable markets becoming much larger."
He added that the fund was also concentrated in somewhat volatile cyclical companies like hardware and energy and traditional broadcasters, as well as other industries that have cloudy futures. Green hopes to put his experience in finding innovators to good use, and he said the fund had added DocuSign since he joined.
"We have a pipeline of around 25 new ideas that we're working on right now that are in that more innovative, highly innovative, hypergrowth disruptive area," he said. "We want to buy a set of companies where we feel like we have superior business models, the right balance sheet to support that growth ... and then buying it at that right price."
Related stories
Green told Insider the following three companies were recent additions to his portfolios and his top stock ideas.
(1) Syneos Health
Syneos has been in Green's small-cap fund since its initial public offering in 2014. Over that time, it expanded from a company that does clinical research for drug companies into a partner for even more firms.
"What they now have is this fully integrated suite for pharma to do clinical development through full commercial commercialization," he said. "That's around a $50 billion to $80 billion market opportunity."
Syneos wasn't a COVID-19 beneficiary, but Green said that meant it wouldn't face any difficult quarter-to-quarter growth comparisons in the near future.
(2) Lyft
While Uber has long been part of the Select Fund, Green said he was more intrigued by Lyftbecause of its US focus and rapid financial recovery.
"The average Lyft rider spent something like $170 in 2020 versus the average US adult spending $9,000 on transportation in total, so very lowly penetrated within the overall transportation budget," he said. "And we think that consumer preferences are shifting in their direction that we have this long runway for growth"
Lyft and Uber's duopoly in the US should help both companies, he said. And while investors value Uber at $90 billion, Lyft is far smaller at about $20 billion. That means an international ride-hailing company that wants to enter the US, or an autonomous-vehicle business that wants a fleet, could eventually buy it.
(3) Wingstop
Wingstop recently opened its 1,500th store, and the wings chain hopes to double its size in the US and get to 6,000 stores around the world. That means it has a lot of room for growth, Green said.
"They're doing to chicken what Domino's Pizza did to pizza as a category: very, very profitable franchise model, very attractive margins, very forward-thinking digital culture and management, embracing delivery off premise," he said.
