Leaders Like Red Hat, FleetCor Rev Up This Columbia Mutual Fund

Columbia Mid Cap Growth Fund (CLSPX) is revving up its engine. In recent periods, the $1.9 billion portfolio has been neck-and-neck with or a tad ahead of the broad market and its midcap growth rivals tracked by Morningstar Direct. So far this young year, going into Thursday, the fund is up 5.08% vs. 4.89% for the S&P 500 and 4.64% for its peer group. That’s an improvement over the past three years, when it slightly lagged the S&P 500.

X Credit starts with leading stocks held by the fund. Top holdings FleetCor Technologies (FLT) and Red Hat (RHT) rose 36% and 74% in the past 12 months. Top new buy Dollar Tree (DLTR) and Arista Networks (ANET) rose 42% and 198%.

Other holdings include Thor Industries (THO) and Align Technologies (ALGN), which are up 48% and 186% in the past 12 months. Like Arista and FleetCor, they happen to be members of the IBD 50 list of top-performing growth stocks.

Columbia Mid Cap Growth Instl performance, holdings graphicEight of the fund’s 10 largest positions as of Dec. 31 had IBD Composite Ratings in the 80s or 90s. So did seven of its 10 top new buys. IBD’s Composite Rating is scored on a scale of 1 to 99. Stocks poised to move higher often have a Comp Rating of 95 or higher.

Managers George Myers, Brian Neigut and William Chamberlain invest in companies poised for sustainable long-term growth and which have high or improving margins and returns on invested capital.

And the managers consider midcaps the sweet spot of the market. With market capitalizations between $2 billion and $30 billion when the fund buys them, midcap stocks are “big enough to offer stability yet small enough to deliver significant growth opportunities,” the managers explain in their Dec. 31 fact sheet.

FleetCor’s Smooth Road

Commercial fleet payment processor FleetCor was the fund’s top holding as of Dec. 31. Its weighting rose to 2.65% from 1.72% at the end of September. Trading around 204, share price is extended from its November breakout from a 171.88 buy point of a long base.

Late last year the company boosted its share buyback program and said that Wal-Mart (WMT) would begin to accept its payment cards at fueling stations.

Insights Into Other Leaders

Red Hat earnings per share grew 12%, 40% and 20% the past three quarters. Red Hat is the top provider of open-source Linux software for corporate data centers.

As IBD has reported, analysts have been looking for traction in Red Hat’s public cloud business as customers shift computing workloads to cloud service providers such as Amazon Web Services, part of Amazon and a Red Hat partner.

Dollar Tree re-entered the portfolio in October. EPS grew 10%, 37% and 40% the past three quarters. In December, the company reported better-than-expected third-quarter earnings and sales. It also raised its full-year earnings and sales forecasts.

Arista Is Taking Share

The managers began their current stake in Arista in November. EPS grew 30%, 37%, 81% and 95% the past four quarters. The cloud-networking software maker is the No. 1 ranked stock in IBD’s Computer-Networking industry group, which in turn is ranked second among IBD’s 197 industry groups.

Arista has been taking share from Cisco in the data center-switching market. “We think Arista’s long-term software development will continue to drive share gains as already demonstrated by the current 100 gigabit cycle and recent switch-router traction,” Morgan Stanley analyst James Faucette recently told IBD.

IBD’S TAKE: You can see how Arista’s strengths — like its 49% three-year EPS growth rate — stack up against its peers’ at the stock’s easy-to-read IBD Stock Checkup page.

Recreational vehicle maker conglomerate Thor Industries gapped up 13% on Nov. 28 as it was about to report a 63% jump in quarterly earnings after the close. That 63% hike capped increases of 27%, 40% and 44% the prior three stanzas.

Align Makes Investors Smile

Invisible braces maker Align is known for its computer-assisted design approach to straightening teeth. Its EPS growth has accelerated for three quarters, growing 18%, 37% and 60% in the three most recent frames. Sales growth has also accelerated in that period.

Trading around 272 and forming a new base, shares are just 2% above their 266.51 cup-shaped base buy point.

The stock is ranked No. 1 in its IBD Medical-Products industry group.


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