With an industry mix that is very different from the typical fund in its category, Robert Bartolo has been producing good news for investors in the $148.1-millionTD Entertainment & Communications -- I.
"Because we're a telecom-based fund, we can look a little more broadly," says Bartolo, co-manager of the five-star rated fund. "You see an eBay buying an online voice-over, and the cable and phone companies converging and getting into each other's businesses, so I think that gives us an advantage." The fund emphasizes telecommunications and media stocks -- as opposed to the information technology names that dominate most portfolios in the Science and Technology category.
Telecom currently makes up about 42% of the TD fund, followed by 36.5% in the consumer discretionary sector. Information technology has only a 21.9% weighting in the fund, compared with 73.6% for the median fund in the Science and Technology category.
Bartolo, a vice-president and portfolio manager at Baltimore-based T. Rowe Price Associates Inc., became the fund's co-manager on April 1 of this year, along with Henry Ellenbogen.
But the duo's involvement for the fund dates back over the past three years, when they generated ideas for approximately 70% of the portfolio. Bartolo has specialized in telecom services and cable companies since joining T. Rowe Price in August 2002. Over the three years ended Sept. 30, the telecom theme and Bartolo's research has helped the fund return a compound annual 20.4%, nearly doubling the 10.5% median return for mutual funds in the technology category.
Bartolo seeks companies with a sustainable competitive advantage in global, media and telecom. There will always be a pretty big allocation to U.S. stocks, he says, because of the firm's U.S. location and easy access to companies. The U.S. allocation will vary anywhere from 30% to 70% of the portfolio.
Bartolo says there are no hard and fast rules when it comes to the weighting of the fund's approximately 70 holdings. It depends on the risk/rewards at the time. "A lot of it is just stock selection, being able to scan the landscape and figure out what companies are well positioned," he says.
Bartolo will sell a stock for two main reasons: if the valuations are no longer attractive or if the fundamentals are going to be more challenging than the market expects.
Historically the fund's portfolio turnover has been a little north of 100%, says Bartolo, but the trend is toward less trading activity. "You can look for (turnover) more in the 50 to 60% range for me and Henry."
The cash position is kept at a low 1% or less -- "we're always fighting for cash to fund our ideas," Bartolo says, laughing.
A general theme running throughout the fund is emerging wireless markets where there's low penetration and a lot of growth. For example, Bartolo holds companies based in Mexico and elsewhere in Latin America. Approximately 12% of the fund is invested in Canadian wireless companies.
In the media/Internet area, Bartolo sees opportunities in companies like Google Inc. ( GOOG/NASDAQ) and Yahoo Inc. ( YHOO/NASDAQ), which will benefit from lower-priced broadband access.
A believer of hands-on research, Bartolo refers to himself as an analyst and spends about 25% of his time visiting companies. He draws on a team of about five investment professionals domestically. In addition, internationally he taps into the expertise of "a couple" of people in Asia, a telecom analyst in Europe and a media analyst in Europe.
A graduate of the University of Southern California, Bartolo received a degree in accounting in 1994. After graduating, he worked at Deloitte & Touche Inc. as a senior auditor and has a Certified Public Accountant designation.
From 1997 to 2000, he worked at what is now called MGM Mirage, Inc., a casino and hotel gaming company in Las Vegas, as director of finance.
In 2000, Bartolo went to the Wharton School of the University of Pennsylvania and graduated with an MBA in 2002. He started as a summer intern at T. Rowe Price in 2001, analyzing satellite communications companies before joining the firm full-time. He received the CFA designation in August 2005.
Bartolo, 33, considers his finance background in the gaming area a key strength. He also taps into the ideas of an analyst at the firm who came from the industry. "We can cherry-pick some of the best ideas from a sector like that." Currently, the portfolio holds approximately 5% of its assets in gaming companies.
"When it comes to video gaming, we're on the verge of the upgrade cycle," says Bartolo. "Look at the last five years. The number of consoles has doubled. They're global assets and there's other opportunities such as advertising in video games."
