Tony Genua expects an upswing in the U.S. economy, led by a cyclical rebound in areas such as housing, autos and consumer spending. "The other longer-term factor emerging that's leading to some opportunities is the manufacturing renaissance, in part related to energy self-sufficiency," says the lead manager of AGF American Growth Class .
"I believe the long-term outlook in stocks and stock prices remains intact," says Genua. "In fact, I think we could be developing into a market environment that may be similar to the 1990s, with an extended economic cycle, and a nice long run and uptrend in stock prices."
Reflecting on the impact of the 2008-2009 financial crisis on the economy, regulation and investor sentiment, "it's going to linger for years," says Genua. But since then, consumers have cleaned up their balance sheets and debt levels have "come down to where they were in the pre-global financial crisis. But we have to keep in mind that that's still historically elevated."
Genua, a senior vice-president and portfolio manager at AGF Investments Inc. in Toronto, has led the $863-million AGF American Growth since January 2005. Launched in 1957, the fund was the original flagship mandate for the firm and is Canada's oldest U.S. equity mutual fund. Genua has also been responsible for AGF Global Select and AGF U.S. Small-Mid Cap since February 2013. In total, he manages more than $2.5 billion.
Genua, 59, received a BA from the University of Western Ontario in 1976. He then pursued additional studies in economics and business at McGill University from 1976 to 1977.
In 1978, he joined the former Canada Permanent Trust in Toronto. In 1986, he moved to RBC Dominion Securities in New York as an international strategist. In 1989, he returned to Toronto to join Scotia Investment Management Ltd. as a vice-president, managing U.S. equities, Pacific Rim and Latin American portfolios.
Then in 1998, Genua moved to KBSH Capital Management Inc. as a principal and was responsible for managing the firm's U.S. equities as well as emerging-market portfolios. He joined AGF in January 2005.
Genua draws on the support of the North American research team of sector specialists. He also taps into the expertise of the global-equity analyst team, as well as teams in Dublin, Singapore and London. He and his teammates meet with more than 1,000 companies a year.
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Genua focuses on growth-oriented, innovative companies that are leaders in their field or in the changing macroeconomic landscape. He favours solid fundamentals, including clean balance sheets, above-average cash balances and below-average debt loads.
Among the top 10 holdings in the Morningstar 3-star rated AGF American Growth is Boeing Co. BA. Genua says the aircraft and aerospace manufacturer is benefiting from the "tailwind of growth" for its industry. "We know that Boeing's record backlog is based on innovation, in particular the 787, the so-called Dreamliner." As well, he adds, the company has very good prospects of ongoing, above-average growth on innovation, as well as passenger growth.Another top holding is Illumina Inc., ILMN, a San Diego-based health-care company. It's "at the doorstep of personalized medicine" through DNA sequencing, says Genua. The price of DNA sequencing has come down substantially and is expected to reach a point where there is going to be reimbursement for sequencing by the insurance companies. "So that's rapidly expanding the addressable market and it looks very good."
Turnover in the portfolio is driven primarily from a bottom-up basis, and "over the past year has been 55%," says Genua. If he sees challenges or a deterioration in fundamentals, he will sell.
"I had Apple Inc. AAPL right from when I started here," says Genua, "and I just sold it a year ago." He held the stock through the company's "ups and downs" because he felt very comfortable that it was still delivering on its promise of above-average results on innovation. "So that one, in U.S. dollar terms, ended up being a 10-bagger for our portfolio. Those kinds of stocks don't come along too often."
