A Stanford graduate, Dr. Ankur Crawford co-manages the top 1% Alger Capital Appreciation Fund (ACAAX) and the top 3% Alger Spectra Fund (SPECX), which are growth-focused funds. In a recent interview with Business Insider, Crawford said the two funds share similarities and are "different flavours of the same process."
She holds several US patents and received several awards, including the "Top Women in Asset Management" in 2020 and the Excellence in Diversity, Equity and Inclusion Awards from InvestmentNews in 2022.
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Crawford shortlists stocks in dynamic industries. She believes that when there's a major shift in the world like the AI cycle, "there is an unrecognised opportunity by the market, partly because the market likes to think linearly." However, markets often don't move linearly during large-scale changes like the "Industrial Revolution 4.0" or the AI wave, she explained, adding that the non-linear growth curve "takes people by surprise" and "we're pretty early on in this AI cycle."
She noted that the 2023 AI rally has broadened this year, a good sign for AI companies. However, concerns remain that too much money is invested in AI chips and solutions compared to the returns they generate for investors and end users, potentially leading traders to invest in other industries. Crawford addressed the concern by stating that people often underestimate such opportunities, and AI's impact can be much more significant than markets are pricing in.
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Crawford's funds share many similarities. For instance, they primarily invest in two types of growth stocks. The first kind is generally high-unit-volume powerhouses with significant influence over their industries. The second type includes prominent firms undergoing a major overhaul.
The high-volume powerhouses are generally "market-dominant players" that shape their respective markets, like Amazon or Google in their early days. Meanwhile, the group of prominent or established firms has already undergone an initial growth cycle but reinvented itself through new business models to speed up growth amid rising competition. "Oftentimes, these are businesses that actually don't trade at egregious multiples, but we think are underestimated in terms of their growth potential," Crawford said of the established firms.
She looks for several attributes in the two categories, such as solid pricing power that can fuel sustainable growth. Hence, "durability of the growth" is a top priority for Crawford's team. "We are not interested in a company that has 30% growth next year that goes to 0% the year after," she said.
As the next step, Crawford develops models based on free cash flow and values stocks based on the enterprise-value-to-free-cash-flow (EV/FCF) metric rather than comparing with peers to generate a final list of companies with attractive valuations. "Cash affords you a lot of flexibility," Crawford said. "And the more cash you can generate, there's so many different things you can do with it — either M&A, or buy your own stock back in times of duress, or pivot your business in a way that other companies or competitors can."
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The Alger capital appreciation fund focuses on large-cap growth stocks, while the Spectra fund has a large-cap bias but is open to investing in companies of different sizes. Crawford can leverage the Spectra fund to short stocks her team finds unattractive. However, both funds have Microsoft, Nvidia, Amazon, Meta, and Apple as their top holdings. During the interview, Crawford also named several stocks in the funds she is bullish on.
Microsoft
With a market cap of over $3.2 billion, Microsoft is the top holding in both Alger funds. The stock has been up 1,500% since Crawford's team first invested in it in the early 2010s. Microsoft shares have climbed over 80% since the beginning of 2023, emerging as a leading AI player and a driver of the prolonged market rally.
"We've chased the EV/FCF metrics up or believed in a higher EV/FCF for this business as we've been investing in it," Crawford said. "Right now, it's not going to be reflected in cash flow because they're having to spend so much to get ahead of the curve and to have a competitive position in the market. But their earnings power is going to be quite significant as we move into '26, '27 and '28."
She highlighted that she had not seen a large-cap stock like Microsoft "acting with the agility of small- and mid-cap stock," which makes it a "very exciting investment" for the coming years.
Nvidia
Nvidia, the leading chipmaker and the top supplier of AI graphics processing units (GPU), has returned massive profits to investors in recent years. The chipmaker's earnings have grown 10X in the last two years and has single-handedly led the stock market rally this year.
Crawford sees more upside to the stock despite the year-long bullish run. According to Goldman Sachs, Nvidia will likely post surprise positive Q2 earnings results next month. The investment bank recently met Nvidia CFO Colette Kress and found that the company will soon start outlining how its AI GPU investments translate to end users' profits to enhance investor confidence and introduce transparency in investor relations.
Goldman Sachs forecast stunted revenue from the Blackwell GPU chips for Nvidia's third quarter, "followed by a more significant ramp in FY4Q (January) and FY1Q (April)."
Taiwan Semiconductor Manufacturing Company (TSMC)
Crawford sees Taiwan-based chipmaker TSMC as one of the most important companies in the world. The market incumbent makes high-performance chips, and the stock is up almost 60% year-to-date. She believes the stock would have climbed more if not more geopolitical tensions.
TSMC recently announced high AI chip demand and tight supply, which coincided with a notable surge in Nvidia's share prices. However, TSMC's stock price remained flat despite beating analyst revenue estimates due to a broader industry slump after former US President Donald Trump indicated changing US policy not to defend Taiwan from Chinese threats unless compensated. The move could hamper Nvidia's chip supply.
According to Crawford, that overhang has TSMC trading at lower earnings multiple than it should, but "that doesn't mean that the business was impaired." Crawford said. "It was trading at a sub-market multiple...for a business that was effectively driving this AI and technological revolution." She believes TSMC's position as a leading chip foundry gives it a pricing power that should propel earnings growth much higher in the future.
Natera
Natera is an Austin-based genetic testing firm that strives to support women's health needs, from family planning and prenatal testing to hereditary cancer screening. "Like any good business does, they wanted to pivot into something that they weren't going to have a saturated market, that wasn't as competitive," Crawford said.
The genetic testing firm has collected data for years by issuing oncology screening tests, which proved costly and has impacted the company's free cash flow. Still, Crawford believes the investment will bear results.
"Their data has come back very strong, and payers are starting to pay up for these tests because they do prove that you can assess or come to the conclusion that you're getting cancer recurrence again without doing expensive scans," Crawford said. "And now they're getting paid for it, but they already have the cost structure in place."
"All of what they get paid is coming through at a 100% incremental margin, which gives them a really nice ramp in both earnings and free cash flow over the next few years," she concluded.
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