Gaining confidence in these top holdings

Author: Riddhi Ruparelia

Covestor model: Long-Term Growth

With 2012 now well underway, we started seeing the benefits of our strategy in the Long Term Growth Fund, with roughly 25% growth year-to-date as of February 3rd. Through market gyrations of last six months, we continued to refine our positioning, looking at troughs as opportunities to buy more small caps.

We moved money out of such storied large cap growth companies like Apple (AAPL) and Intuitive Surgical (ISRG) to buy more of holdings in our favorite companies like SodaStream (SODA) and QlikTech (QLIK).

As Europe-related fears subside, the American economy is starting to perform better and investors’ interest in stocks has increased, improving the outlook for strong growth companies in our portfolio.  As such, we continue to gain more confidence in our top holdings.

SodaStream expanded its distribution last holiday period by many times compared to 2010 Christmas time. This should bring in strong results when they announce results. At QlickTech management is bullish as shown by management’s commitment to invest in growth. We look for solid results from this Business Intelligence (BI) software vendor over next few quarters.

With a price to sales ratio of about 4.0 as of Feb. 12, Genomic Health (GHDX) is priced as if its growth phase has ended. This strong player in genetics based tests for cancer seems to be developing several more tests that may be promising. Even if one of them succeeds, there is opportunity to grow business multiple times from here. All this potential at such a proven company is available at zero cost to investors right now.

Then there is K-12 Inc. (LRN). The stock went down from $38 to $17.07 in December on a negative article in New York Times. While the company needs to pay more attention to couple of points raised in the article, the Times did not find out anything that isn’t fixable in our opinion. However, it did create tremendous buying opportunity typically not available for such strong growth stock. We certainly took advantage to buy more of LRN stock and look to continue to add while the opportunity lasts.