Motola says the fund takes its cue from the three baskets strategy employed by Bill Fries, manager of the Thornburg Value Fund. When Motola joined Santa Fe-based Thornburg Investment Management in 2000 to run the Thornburg Core Growth Fund, he tweaked the concept to fit a growth strategy.
    Right now, he's finding the consistent growth basket most difficult to fill. It accounts for about 25% of assets, compared to 33% in industry leaders and 35% in emerging growth. "Some of the stocks in the group hit their price targets, and I've had a hard time finding quality replacements in that basket. In periods of uncertainty investors are drawn to stocks that generate a lot of cash and have fairly predictable business models, so it's difficult to meet our valuation criteria," he says.
    Based on estimated 2006 earnings, the portfolio is a little pricier than some indexes, but cheaper than others. The fund has a price-earnings ratio of 22.9, compared to 26.5 for the Nasdaq 100 Index, 19.0 for the Russell 1000 Growth Index, and 15.1 for the S&P 500 Index.
    Stocks in the consistent grower group include Affiliated Managers Group, which acquires majority interests in mid-sized investment management firms with between $500 million and $15 billion in assets. AMG's current portfolio of affiliates includes Tweedy, Browne Company; Essex Investment Management, Friess Associates, Rorer Asset Management, Frontier Capital, The Managers Funds and the recently acquired Third Avenue Management. The company differs from most of its competitors in that it typically purchases about a 60% ownership interest, not 100%.
The advantage of AMG's approach is that the company provides a liquidity event for the founders and other shareholders, while creating an incentive structure to keep younger management talent in place.

Among growth industry leaders, Motola favors prospects for Las Vegas Sands, which operates casinos, hotels and convention facilities. Properties include the Venetian Casino Resort and the Sands Expo and Convention Center in Las Vegas, as well as the Sands Macao Casino in Macau, China.

The Macau gaming opportunity over the next five years is particularly attractive. Demographics in the region are compelling for years of growth driven by low penetration of mass-market gaming, growing incomes, easing of travel restrictions for mainland Chinese and infrastructure development. "Las Vegas Sands is going to operate six out of the ten planned properties there," he says. "That's like one company owning 60% of the Las Vegas strip."
    Google, another stock in the industry leader basket, has become a lightening rod that, according to Motola, has "polarized parts of our investor base." Although the stock sold off earlier this year after a disappointing earnings announcement, Motola feels it remains a worthy long-term investment. "Some people view Google as the second coming of the Internet bubble," he says. "I see financial statements that show over $600 million in operating cash flow in each of the last three quarters. The company doesn't have high capital requirements, so the ongoing amount of money that needs to be reinvested in the business is modest compared to other companies of its size and cash level. That's a pretty real business."
    Emerging growth companies in the portfolio include Satyam Computer Services, an Indian-based consulting and IT services company. Satyam offers a range of services including software development, application implementation and business process outsourcing to customers all over the world. 

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