Tom Marsico's growth fund has crushed its benchmark for 13 years — and returned 28 times its peers in 2020. Here's what he's been buying, and the beaten-down stocks he plans to grab after the pandemic.

  • Tom Marsico's Growth Fund has been one of the best-returning international stock funds in the world for the last decade.
  • He told Business Insider about the regions and sectors he's betting on, and the types of stocks he's underweighting or omitting entirely.
  • His approach to growth investing has yielded remarkable results in 2020, as his fund had returned 28.7% as of August 4. The typical fund in the global category was up about 1% over the same time. 
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Knowing what you want and knowing what you don't want can be equally important.

Tom Marsico seems to have a strong sense of both. He's the founder, CEO, and chief investment officer of Denver-based Marsico Capital Management and the manager of its Global Fund, which has been one of the best worldwide stock funds throughout the past decade.

Kiplinger rates the global fund as the fourth-best international stock fund for the decade ending June 30, and the tenth-best over the previous 12 months.

That kind of consistency produces powerful results: Since its inception in June 2007, the global fund has climbed 274% while trouncing the 40% gain of its benchmark, the MSCI All World Index. 2020 has been even more dramatic, as Morningstar says the fund has returned 28.7% as of August 4. The typical global stock fund is up 1%.

So what does Marsico want in the fund? In an exclusive interview, he explained his must-haves.

"The companies that we're investing in are very knowledge-based," he said. "We like more of these asset-light businesses because generally they generate higher returns, which we think allows for greater innovation."

Entire industries where Marsico doesn't see enough innovation, such as oil and gas, finance, and telecom, are mostly absent. That's helped him stand apart from his benchmark.

He calls digitization a key trend, and he's invested in  it with semiconductor companies like Nvidia and ASML, cell tower companies Crown Castle and Cellnex, and a basket of payments companies like PayPal and Global Payments.

"When the downturn in the market was experienced in March, we actually added emphasis to more of these businesses, such as Shopify, Adyen, Square, because the valuations of these companies came down to levels that we thought were very attractive," he said. "We think that these are very long-lasting, durable businesses."

His new additions during the market downturn included Spotify and Lululemon.

Marsico explains that he's not just focused on tech and consumer-related areas, but on regions that have the most growth and innovation. That means the US, China, and India are heavily represented in the Growth Fund while European stocks are scarce.

Despite the big returns for vaccine developers like Moderna and Novavax, there's also very little representation of healthcare because Marsico expects a wave of new public-private partnerships to reset the rules of the industry. But he named a couple of exceptions.

"Lonza, which is going to be providing the ability to manufacture vaccines and other biologics, has a long history of success in these areas," he said, while he likes the potential of Roche's vaccines business, its cancer medicines, antivirals, and its diagnostics business.

While some fund managers are taking the profits they made during the spring rally and moving on to new areas, Marsico says he still likes the stocks he bought during the downturn and isn't making wholesale shifts. But he's already starting to evaluate the stocks he could add to the portfolio when the COVID-19 pandemic is under control. 

"We're looking at companies that are using the internet space to bring about services to the hospitality industry and to media," he said, with an eye on companies that have remade their businesses after the pandemic stopped them in their tracks.

One company that fits that description is Disney, which has integrated many of Fox's assets and launched Disney Plus this year. He also sees potential in ticketing services company LiveNation, assuming its balance sheet still looks solid when the crisis ebbs.

Read more:

  • Fund manager Tom O'Halloran quadrupled investors' money in 9 years by betting on super high-growth companies. He explains his approach, and why new technologies could make the next decade even more prosperous than the 2010s.
  • These 16 global stocks have at least 20% upside in the next year — and they'll continue to thrive as COVID-19 accelerates a crucial technological shift, UBS says
  • Jefferies is telling investors to buy these 13 cheap, under-the-radar stocks in order to bet on an economic recovery

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