Stock-picking is still in vogue with Gordon Fowler, CEO of the $24 billion Glenmede Trust fund. A recent Barron’s article describes the process employed by his team. “Every morning, Fowler assembles his wealth advisory group simply to brainstorm about individual stocks and come up with smart client moves.”
According to Fowler, deep analysis of equities makes more sense than picking broad asset allocations. “In this environment,” he says, “stock mispricings are bound to arise, and trying to make money through asset allocation becomes progressively more difficult.” His team looks for stocks with “reasonable” valuations, a strong chance for further profits and a steady flow of “good news on earnings.” Fowler is not a fan of index investing because of its weighting based on market value “without regard to valuation.” He says this results in overvaluation of “fashionable” stocks and can create market inefficiencies. In particular, he refers to the tech stock bubble in the late 1990’s.
Fowler is hopeful about U.S. equities (which comprise 31% of the firm’s moderate-risk portfolio). “Our general view,” he says, “is that the world’s economies are still okay. We’re late in the cycle, but this is a very long cycle. The U.S. is set up for decent earnings growth over the next year or two.”