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That is true of the stock market and the reams of analysis circling it. Company management and Wall Street analysts tend to be overly optimistic or pessimistic, which is exactly what Motola seeks to look past and exploit. Investors and advisors appreciate Motola’s work. “When you sit down and you talk to Alex, you realize how brilliant he is, what a 34000 phenomenal listener he is, and how passionate he is about investing,” says advisor Mark 26000 Biegel, of Biegel and Waller in Columbia, Md. “You can’t see that on a piece of paper.” 18000 A Life in Finance Takes Hold The boundaries of a professor’s 10000 drove life Motola to switch from academic pursuits to a more pragmatic career as a money manager. He didn’t want to be a person who knew the most about one thing. He instead preferred to be on a dynamic learning curve, one that was changing all the time. “My expertise in British and French history seemed limiting in a way that what I do now isn’t,” he says. “I learn about new companies and new industries all the time.” The path Motola followed was not by chance. His father, who is now a retired accountant, advised him against studying business as an undergraduate. He counseled his son to learn how to think, write, and study something he enjoyed in college. His father reasoned that Motola could always later go to business school, which is exactly what he did at the University of California, Berkeley. After graduation, Motola used the local newspaper’s want ads to find his first and second jobs in the financial field. He started off working for California-based CoreLink Financial and later joined Insight Capital in the San Francisco Bay area, where he eventually served his first stint as a portfolio manager. He was drawn to Thornburg in 2000 for a number of reasons. Insight had relied heavily on momentum investing, which was a popular, and successful, investment strategy in the late 1990s. It emphasizes stock prices as much as fundamental factors such as earnings and sales growth. Motola resisted the price momentum side of the strategy, even though it often led to good results during that time. His leanings were rooted in research, not the price charts a computer was spitting out. Motola liked the fundamental focus that Thornburg placed on all of its investment strategies. He was also impressed with the firm’s founder, Garrett Thornburg, and his entrepreneurial spirit, as well as others at the firm, such as now-CEO Brian McMahon and value manager Bill Fries, who received Morningstar’s International-Stock Manager of the Year award in 2003. Three Buckets, One Compact Portfolio Alex Motola Thornburg Core Growth THCGX $34K 26 18 S&P 500 03 04 05 06 07 08 Category Mid-Cap Growth 8 Morningstar Rating QQQQ Minimum Investment $5,000 Expense Ratio (%) 1.36 5-Yr Anl Total Rtn (%) 17.93 5-Yr Anl Investor Rtn (%)* –4.83 5-Yr Anl TR % Rank Cat 9 Stewardship Grade — Thornburg and Motola launched Thornburg Core Growth THCGX soon after he joined the firm. In early 2007, he started managing freshly minted Thornburg International Growth TIGAX, a natural step for Motola, who pays significant attention to overseas stocks for Core Growth. Motola’s strategy for both funds starts like many others’, but it doesn’t lead him to the same stocks. The portfolios he manages hold a distinctive mix of companies, and they do not closely resemble benchmarks or peers. Motola applies proprietary quantitative screens that help turn up investment ideas. The screens look for factors such as valuation, capital use, and margins. Motola and his team also uncover new ideas as they research other companies, attend conferences, and read. The best ideas make a research priority list, and those are the companies that the team spends a great deal of time on, building financial models to assess their valuations and potential. The process sounds a lot like what other managers do, but it has a deliberate purpose for Motola. He knows that his research tendencies could cause him to be weighed down in the details. He wants to focus on the right details, though, so he designed his system to help him dive into the most relevant minutiae to give the portfolio an edge. *Dollar-weighted return that measures how the typical investor in the fund fared. Data as of March 31, 2008. Mar-03 Mar-04 Mar-05 Mar-06 Mar-07 Mar-08 Apr-03 Oct-03 Apr-04most Apr-05 Oct-05 Apr-06 Oct-06 Apr-07 Oct-07 Apr-08 May-03Nov-03the Sep-04 distinctiveJun-06 Dec-06 Jun-07 Dec-07 Jun-03 Dec-03 Jun-04 Dec-04 Jun-05 Dec-05 part of May-07Nov-07 Jul-03 Jan-04 Jul-04 Jan-05 Jul-05 Jan-06 Jul-06 Jan-07 Jul-07 Jan-08 Aug-03 Feb-04 Aug-04 Feb-05 Aug-05 Feb-06 Aug-06 Feb-07 Aug-07 Feb-08 Sep-03 Oct-04 Sep-05 Sep-06 Sep-07 Perhaps May-04Nov-04May-05Nov-05May-06Nov-06Motola’s approach is his execution of it. He believes in running a compact portfolio of 30 to 40 names, and he spreads his assets evenly across three buckets: growth industry leaders, consistent growers, and emerging-growth companies. He lets his sector weightings fall where they may. As a result, the fund is focused on fewer stocks and sectors than are its peers. Tough times for the fund’s stocks, therefore, will lead to tough times for its shareholders. Thornburg Core Growth has taken it on the chin since late 2007, as stocks in each bucket have been slammed. Biegel, the advisor, is unconcerned. “We try to buy smart people and understand that if you’re going to have a growth manager, you’re going to have to expect volatility. We limit the downside in other ways, not by our choice in managers.” MorningstarAdvisor.com 65

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Morningstar Advisor - Spring 2008

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