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  • Matt Moberg, who manages the $5 billion Franklin DynaTech Fund, saw his portfolio smash benchmarks in 2017 with a 39% return.
  • A big part of Moberg’s investment success stems from the lessons he learned pursuing his undergraduate degree in European history.
  • The DynaTech fund also takes a unique approach to diversification.

Upon first glance, Matt Moberg’s background fits that of your traditional finance professional.

He got his MBA from a top-tier school, and became a certified public accountant (CPA) early in his career. After an internship at Franklin Templeton, he scored a full-time gig and eventually ascended the ranks over two decades to his current position as lead manager of the firm’s $5 billion DynaTech fund.

But it’s Moberg’s undergraduate background as a European history major he says gives him an edge when it comes to assembling the perfect portfolio.

Before you dismiss that claim, take a look at the wild success he’s enjoyed:

  • In 2017, the DynaTech fund returned 39%, more than doubling the benchmark S&P 500’s 19.4% increase. That put it in the top 10 of all large-cap mutual funds tracked by Kiplinger.
  • On a longer-term basis, the DynaTech fund is in the 95th percentile or above going back three and five years, according to Bloomberg data.
  • Since Moberg took over as the lead manager on the DynaTech fund in 2009, it’s grown by roughly 10 times, to $5 billion from $500 million.

So how has Moberg’s history degree helped him? To hear him tell it, it’s all about studying past occurrences for hints about what’s set to transpire in the future.

“One of the things I find interesting about this line of work — particularly growth investing — is the pattern recognition,” he told Business Insider by phone. “My liberal arts and history background has been as useful as the CPA, which has surprised me. I almost find that background more useful.”

Parallels to the 1800s

One historical period of particular interest to Moberg is the two-decade span from 1860 to 1880. It was then that three technological developments — the internal combustion engine, electricity, and the telephone — became prevalent, bringing with them new companies and industries.

He likens this to how many of today’s biggest and most successful companies are innovating. And unsurprisingly, those types of corporations — including Amazon, Facebook, and Alphabet — are heavily featured in the DynaTech fund, which counts innovation as a core tenet.

“I’m trying to think about how those developments happened, and how long those industries were in their growth phases,” Moberg says about his historical research. “During that time, the names Rockefeller and Ford were more famous than the president. And while we probably can’t say that now, we have names like Bezos that are arguably more famous than much of our current government.”

Moberg is even ambivalent about one commonly cited fear associated with the types of mega-cap conglomerates so heavily featured in his fund: the prospect of regulation.

We have a playbook, and it helps us build a framework for what might happen

“Quite frankly, things rarely end that poorly,” said Moberg. “Even if these companies get broken up, their break-ups actually end up being great companies themselves. This gives us some confidence over the long term.”

While most people would cringe at the prospect of it coming to that, Moberg’s historical points of reference allow him to continue holding large positions in these companies with a high degree of confidence.

“When some hurdle pops up, we’ve usually seen it play out before,” he said. “We have a playbook, and it helps us build a framework for what might happen.”

A unique approach to diversification

Moberg’s quest for innovative companies has seen him buy large positions not just in Amazon, Facebook, and Alphabet, but also Visa, Mastercard, Tencent, Adobe, and Those eight companies are featured in the DynaTech fund’s top 10 biggest weightings, and when combined they account for more than 25% of the entire portfolio.

And since traditional industry classifications put all of those companies but Amazon into the technology sector, the DynaTech fund might appear to lack diversification — perhaps to a dangerous extent. 

Moberg doesn’t look at it that way, largely because he thinks many of those companies are mislabeled. In fact, he tries to use those supposed misallocations to his advantage as other fund managers chase a flawed idea of what a balanced portfolio looks like.

We don’t believe yet that the index providers have fully caught up to how companies are classified. We use that to our advantage

“Most things that are new, with the exception of healthcare and biotech, start as technology and then move over into their proper classification,” said Moberg. “We believe that we run a very diversified portfolio, but don’t believe yet that the index providers have fully caught up to how companies are classified. We use that to our advantage.”

With that in mind, the question remains: Couldn’t a sharp selloff in the traditionally labeled tech sector still torpedo the whole fund?

It could, but it would hardly be of concern to Moberg, who buys stock in companies that he expects to hold for an extended period as their respective innovations play out.

In other words, he’s thinking way beyond whatever event may seize headlines in a given week — which explains why he was so non-plussed when asked about the stock market’s recent correction.

“If a company has room for secular growth, that’s what gives us confidence in them, more than the stock prices themselves,” he said. “Innovation takes time to play out, so we’re not interested in short-term performance. The idea is to hold these companies for decades.”

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