Morningstar - Q4 2020 - 80

Investors

Osterweis Emerging Opportunity OSTGX
Growth of $10K

$25K
19.43 20
OSTGX

14.18
Morningstar US
Small Growth

10/2017

10/2018

15
10
5

10/2019

Morningstar Category

Small Growth

Morningstar Rating

QQQQQ

Expense Ratio (%)

1.16

Source: Morningstar Direct. Data as of 09/30/2020.

Platt says he normally doesn't invest in funds
with less than $100 million in assets, but he made
an exception for Osterweis Emerging Opportunity,
first investing when the fund was well under
that mark. "I remembered Jim Callinan from RS,"
Platt says. "Given his own investment, I know
he's going to be conscientious and do what's best
for my clients."
Advisor Tim McFadden placed clients in the fund
almost as soon as it opened-and he personally
invests in it, too. McFadden, founding partner
of TJT Capital Group in Stamford, Connecticut, was
comfortable getting on board early because
he had invested with Callinan since the Putnam
days. "He's done a very good job over the years,"
he says. "I used Putnam OTC and then the
company I was working for helped seed a few of
the Robertson Stephens funds. If a good
portfolio manager goes elsewhere, we stay in
touch and take a look at the new opportunity."

a small team dedicated to his approach and they
are building a track record together. Analyst
Matt Unger was an analyst at RS Investments
before joining Callinan at Osterweis in
2016. Bryan Wong was part of the Osterweis
core equity group when Callinan arrived,
but his growth orientation made him a better
fit for the emerging growth strategy, and he moved
over in 2017.
"Matt's first recommendation was Trex TREX,
so he hit the ground running," laughs Callinan.
Trex was one of the fund's earliest picks.
"The company had all the things most growth
investors look for, and then we layered
on the anchor-point potential. At the time, they
were aiming for a 50% share of the composite
decking market. Looking forward, we think
composites like Trex can become a third of the
total decking market." The stock surged this
year on the wave of outdoor home improvement
projects sparked by the pandemic.

Stock by Stock

While leaving a large firm for a smaller one
can increase opportunity and independence, it can
also mean the loss of extensive research
resources. At Osterweis, Callinan has carved out

80

Morningstar Q4 2020

Unger focuses on industrials and healthcare,
while Wong's expertise is in technology
and software. Callinan credits Wong with Fiverr
International FVRR, another home run for

the fund so far this year. The digital-services
marketplace "probably got a four-year jump-start
to their business now that people are working
from home. Revenue growth accelerated
from 44% in the first quarter to 82% in the second.
That's a great dynamic, but that went into the
stock price."
Callinan uses a valuation overlay that led him
to sell Trex and cut back on Fiverr this year.
"We have a very disciplined valuation approach
layered on to the concentrated portfolio
so that when we do get a move in a stock, we
don't hold on to it too long. We trim and
then eliminate the name when the anchor-point
potential is fully realized."
When valuations are inflated and volatility is high,
Callinan is willing to raise cash-in late August,
his stake was on the high end, at 15%. That
allows him take advantage of buying opportunities.
Enphase Energy ENPH has been one such
opportunity, as other investors dumped the stock:
"The company has great margins, but 'the
world's coming to an end, who's going to buy
a solar system?'"
Morningstar - Q4 2020

Table of Contents for the Digital Edition of Morningstar - Q4 2020
