Ethan Meyers, the research director at Westfield Capital Management, has a knack for identifying promising investments that have proven fruitful, especially for the Harbor Small Cap Growth Fund, where Westfield is a subadviser.
The fund has consistently outperformed, landing in the top echelons of its category over the past five years, including a notable finish in the top 14% for 2023, as per Morningstar.
Meyers’ diverse investment strategy spans small to large caps. Yet, he currently sees the most potential in small-cap stocks, citing their significant upside compared to their larger counterparts, reported Business Insider.
The backdrop of U.S. stocks reaching all-time highs masks the nuanced reality of the market, Meyers told the publication. While indices like the S&P 500 have surged, the performance of many individual stocks remains lackluster.
This disparity has led to a market concentration in a handful of large-cap growth stocks, such as Amazon.com Inc (AMZN), Apple Inc (AAPL), and Microsoft Corp (MSFT), creating a divide between the market’s “haves” and “have-nots.”
Meyers argued that this concentration has created an unsustainable valuation gap, with less recognized stocks trading at a significant discount.
He believes this presents a ripe opportunity for mean reversion, where capital redistribution from the market’s giants could ignite a rally in smaller companies.
Among the stocks Meyers is bullish on, Ascendis Pharma stands out for its innovative TransCon drug development platform, which promises to improve patient outcomes and drive profitability significantly. Meyers said he anticipates blockbuster sales and earnings growth for the company’s leading drugs by 2030.
Comfort Systems, a leading HVAC, plumbing, and electrical contractor, is poised to benefit from the trends of onshoring and nearshoring. Despite its impressive growth and strong balance sheet, the company remains under the radar of many investors.
ITT Inc., an industrial conglomerate, may not grab headlines like tech companies, but its high returns on invested capital make it a solid investment. Meyers said he values the company’s steady performance and its potential to diversify investment portfolios.
The housing market’s dynamics have shifted, favoring new construction as rising interest rates discourage moving. According to Meyers, Meritage Homes is well-positioned to capitalize on this trend, which is driven by demographic shifts and a focus on desirable geographies.
Like Meritage Homes, M/I Homes benefits from the current housing market conditions. Meyers highlights the company’s strategic positioning in regions with solid population growth and its focus on affordability as key drivers of its success.
In conclusion, Ethan Meyers’ investment strategy focused on small-cap stocks presents a compelling opportunity for investors looking to capitalize on potential mean reversion in the market. By identifying promising companies with strong growth prospects, Meyers continues to deliver impressive results for the Harbor Small Cap Growth Fund.
