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ROB MAGAZINE

Blackstein isn't afraid to swing for the fences. Here's how he's racked up a solid long-term batting average

There's a good reason the name of one of the funds Noah Blackstein manages contains an abundance of words that evoke aggressive movement. The Dynamic Power Global Growth fund is only interested in the fastest-growing companies in the world and—more importantly—those that can maintain a torrid pace.

Starting with all the investible stocks everywhere in the world, Blackstein looks for those with the strongest chances of achieving double-digit growth on both the top and bottom lines. "There are just not that many companies that can do that," he says. "Just because you're generating high revenue and earnings growth doesn't mean you can sustain it."

By running a basic growth screen, Blackstein generates an initial list of candidates—usually 100 to 120 stocks. "Then the process of whittling down begins," he says. Blackstein weeds out companies riding a one-time boost, like a big acquistion or a higher commodity price, as well as those bouncing back from a dismal year. "It comes down to fundamentals—figuring out how much bigger the company can be," he says.

That process led Blackstein to invest in Google's IPO in 2004, when many investors were scared off by the high price of $85 (U.S.). He thought that Google's opportunities in online advertising were far greater than what the market was forecasting. The stock helped juice his fund's returns for several years.

It is a high-stakes strategy that often leads to high turnover, but Blackstein embraces the volatility that comes with it. The fund often contains as few as 20 names, compared with the 80 to 100 stocks found in many global funds, and its performance can swing wildly. Over the past five calendar years, the fund's annual returns have ranged from a 12% loss last year to a 41% increase in 2013. His fund "really looks nothing like any index," he says.

But over time, growth has been solid. Under Blackstein's leadership since its inception in 2001, the fund's returns have averaged more than 8% a year.

Blackstein's Top Stocks

Alibaba Group Holding Ltd. (NYSE: BABA)
The Chinese e-commerce giant's sales are still growing rapidly, but the market is not expecting Alibaba's profit margins to move much over the next few years. "So, any margin improvement is pure upside," Blackstein says. The company also keeps learning more about its customers. "I believe in Alibaba's ability to exploit [its] data and data mining."

Zalando SE (Frankfurt: ZAL)
This German online clothing retailer thinks of itself as a technology company first. And it is building an e-commerce platform that could see it narrow the gap between itself and U.S. retailers in terms of online market penetration, says Blackstein. With an increasing share of a rising market, Zalando could realize growth of up to 25% annually over the next several years.

Raia Drogasil (B3, Brazil: RADL3.SA)
Brazil's largest pharmacy chain competes with many owner-operated stores. "It's bringing in more like a Walgreens or a CVS style," says Blackstein. That means lots of opportunities to boost per-store sales in a country with an aging population and relatively low spending on pharma, health and beauty. There's also room to grow geographically.