A stock picker who's dominating 92% of his peers breaks down his market-beating strategy — and reveals 5 stocks he loves, even as earnings growth dries up

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Jim Tierney at AB invests in no more than 20 companies that hold the promise of growing profits even in an earnings recession.

, overseen by Jim Tierney, has outperformed its Lipper category on an annualized basis during his five years as its chief investment officer.

While other investors are panic-selling, these episodes present his best opportunity to prove that the stocks he's invested in can thrive no matter what. As the chief investment officer of the $522 million, he's tasked with finding companies that can deliver earnings growth regardless of the market-wide climate.

The fund's more rudimentary performance numbers tell the same story of outperformance. It has beaten its Lipper category on an annualized basis during Tierney's five years as chief investment officer. It's also in the 92nd percentile versus peers over the last year, according to Bloomberg data. He had managed the same strategy at W.P. Stuart and assumed the CIO role after AB acquired the firm in 2013.

He's also looking for solid revenue growth that's generated organically by sales volumes. One red flag in this regard is the excessive use of leverage, because if macroeconomic conditions turn south and credit markets dry up, such companies would be vulnerable to massive losses or even liquidation. This means that when he's not listening to analyst calls during earning season, he's making time to visit company leaders at their headquarters. These visits are key, he said, because executives tend to be more relaxed and candid on their home turf versus when they're being hurried around New York City on roadshows.

"Think about your microwave, which, five years ago, had no intelligence in it. Now you have microwaves that are being built with voice recognition.

 

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