Don't Underestimate the Power of 'Hidden Compounders'

Stansberry Investor Hour

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On this week's Stansberry Investor Hour, Dan and Corey are joined by John Barr. John is a managing director at Needham Funds, where he has served as co-portfolio manager of the Needham Growth Fund and portfolio manager of the Needham Aggressive Growth Fund for 15 years.

John kicks things off by discussing his investment philosophy, what Needham Funds does, and the power of compounding. He says he tries to find companies that are hidden compounders that will eventually turn into quality compounders. This leads John to share the four criteria he looks for when trying to find hidden compounders. He names two such companies that fit the criteria, breaking down the thought process for Needham's investing in each one. (1:39)

Next, John explains why he's such a fan of family-run businesses and names a power-conversion company he likes that's still being led by its founder. He then discusses what sets Needham apart from other funds, including its preference to hold on to quality companies for a long time – even through 50% drawdowns. And John details how he decides when to actually sell a company, although he notes that he made a mistake with Dick's Sporting Goods. (21:31)

Finally, John reminds investors to know and play to their strengths. And he urges them to ignore all the noise in the news, as being successful in the markets requires a fair amount of optimism about the future. Talking broadly, John says that Needham has been investing in infrastructure for the past decade-plus and more recently has been looking at defense companies. He names military shipbuilder Huntington Ingalls Industries as a solid pick today. Plus, he names a couple skilled-labor-school stocks he likes, as skilled labor is set to remain in high demand. (40:58)

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