- The $522 million AB Concentrated Growth Fund managed by Jim Tierney is in the 92nd percentile versus its peers over the past year, according to Bloomberg.
- His mandate is to identify and invest in companies that can deliver secular, long-term earnings growth regardless of marketwide conditions.
- In a recent interview with Business Insider, Tierney shared his best advice for other investors, and how he knows it’s time to sell a stock he believes in.
Many of the costliest mistakes investors make are not caused by bad math or incorrect forecasts.
Instead, they’re caused by greed, fear, and other emotions that take over when the stock market makes extreme moves.
Avoiding emotional mistakes is essential to surviving as an institutional investor tasked with growing other people’s money. It’s even more crucial when investors like Jim Tierney are tasked with finding businesses that can continue to grow their earnings no matter what curveballs the economy throws.
As chief investment officer of the $522 million AB Concentrated Growth Fund, Tierney’s best opportunities to prove his expertise are in volatile markets, while other investors are counting losses. It’s a task he’s delivered on so far: His growth fund is in the 92nd percentile versus peers over the past year according to Bloomberg, and has beaten its Lipper category on an annualized basis during his five years as CIO.
This mandate requires that Tierney sticks to his guns when a company he’s invested in is going through a rough patch. And it forms the basis of his primary piece of advice for other investors: have conviction.
His concentrated strategy of holding 15-20 stocks at a time means he must have a rock-solid case for why every one deserves to be in his fund. This conviction is a trait that can benefit other investors during market sell-offs because it can curtail their tendency to panic-sell.
"When I look at fund returns in the mutual fund industry versus investor returns, it almost makes me cry, just given how bad retail investors can be on timing their entry and exit in and out of funds," Tierney told Business Insider by phone.
He continued: "It all boils down to conviction: Don’t be shaken at the bottom and don’t chase at the top."
Tierney said his goal is not to hunt for companies that benefit from broader market upswings. His clients specifically buy his fund to profit from stocks that can grow no matter the macro environment, so any deviation from that mandate would come off as a change of mission. Also, he tries to avoid the trap of trendy stocks that do well in good times but crumble when market conditions change.
It’s one thing to resist panic-selling, but it’s another to know the appropriate time to throw in the towel on a stock.
The key is recognizing the difference between a sell-off that’s part of a marketwide shift, and one that’s driven by a radical change in a company’s business, according to Tierney. In other words, it all boils down to the fundamentals.
"It’s not blind conviction," he said. "You need to always come in and reevaluate the facts everyday and make sure the facts have not changed. If the facts haven’t changed, then it doesn’t make sense to sell just because something’s down."
That said, the middle of a stock-market crash is not the ideal time to be contemplating whether to sell. According to Tierney, it’s a question that should be settled before volatility hits, which takes us back to his core piece of advice: have conviction.
- JPMorgan quant guru Marko Kolanovic shared with us the often-overlooked force dictating market returns — and revealed what it’s saying about the future
- JPMorgan quant mastermind Marko Kolanovic can move markets with a single report. He gave us a peek inside how he analyzes data and makes his big calls.
- Bank of America scoured hundreds of mutual funds with $1.5 trillion in assets and identified 7 neglected stocks poised to surge after crushing earnings