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Friday, April 23, 2021

Is investing in sun something you do or don’t do?

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“It didn’t come as a surprise to me,” said Don Urbach, who co-managed the $1.2 billion BlackRock Technology Growth Fund, which beat its category average by 6.9 percentage points in the third quarter.

The fund owns Amazon shares, which continued to surge with the rest of the market. But it also increased its stakes in companies such as Tesla, where shares rose 58 percent this quarter, and Tesla’s chief executive, Elon Musk, who also was focused on the sun.

Mr. Urbach explained why he likes solar. “It’s capital-efficient and has attractive cash flows,” he said. “I think this company [Tesla] is basically the best-managed solar company in the world.” The stock, he said, “is trading at a discount to intrinsic value.”

Netflix delivered the biggest point of return for the sector, but three stocks including Splunk, a company that produces big data analytics for companies, also put up healthy gains.

Naysayers have said the plunge in raw materials prices is likely temporary and their forecast of continued economic growth will pull share prices up. Jeff Smith, who runs the $172 million Smith Asset Management Fund, said when that happens, companies that do well should follow along. “I am still optimistic and bullish for the fourth quarter,” he said.

Mr. Smith liked consumer products company Under Armour, which has a large international footprint. He also is bullish on alcohol producers, including Diageo, after Germany’s Bertelsmann sold its stake in the company last week. “They seem cheap,” he said. “They are becoming more competitive. They are becoming a leader in China.”

Alphabet, the parent company of Google, was singled out as a stock in which investors are looking “too cheap” by Dom Howard, the $100 million Dom Howard Growth fund. The company’s second-quarter profit was flat, but Google is still growing strongly, he said. “I think it’s only going to get better,” he said.

In healthcare, a sector that had lagged the rest of the market for some time, Paul Kron, who runs the $50 million Jennison Gold Growth Fund, said he was seeing health insurers rise. “People are buying them now because they were so weak for so long,” he said. “They are some of the best-managed companies in the business.”

Mr. Kron, who owns both UnitedHealth and Centene, an insurance company that focuses on the states, said he had seen a return to buying insurance companies that focus on government programs such as Medicaid, Medicare and the Children’s Health Insurance Program. “The insurance company sector is trading at probably more attractive valuations than it has been since 2009,” he said.

One more bit of good news about the stock market: New technology, including Tesla, could be cheap, said Tom Marsico, the $4.1 billion Marsico Growth Fund’s manager. “I think Tesla is a new age,” he said. “I do think it can be more affordable. It hasn’t solved its issues, but I do think the companies coming out of Tesla will have lower-priced car technology than what we are seeing from Detroit.”

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