Derek S. Johnston, CFA, is Portfolio Manager and Research Analyst at Conestoga Capital Advisors, LLC. He joined the firm in May 2015 and became Co-Portfolio Manager for the firm’s SMid Cap Growth strategy on February 1, 2016. He also provides equity research across the small- to mid-cap universe. He has 20 years of experience in the financial investment industry. Prior to joining Conestoga, Mr. Johnston worked as a co-portfolio manager for small- and smid-cap portfolios at 300 North Capital, LLC, located in Pasadena, California, from 2007 to 2015. He also was an equity research analyst for small-cap equities at Engemann Asset Management for two years and an equity research associate at Banc of America Securities for three years.
In this 4,499 word interview, Mr. Johnston gives some great advice for investing in the current market.
“One of our top holdings is a company called CoStar Group (NASDAQ:CSGP), and we have a long history with this…They have a huge competitive moat with 90%-plus renewals, they have very strong pricing power because it has such great data, it has 30%-plus EBITDA margins, and they generate a ton of cash. They have about $1 billion in cash on the balance sheet, no debt and a $15 billion market cap. And why we like this now is it’s coming off a multiyear investment cycle where they invested in different parts of the business. They also made several strategic acquisitions, like the multifamily side of the business I mentioned earlier.”
The small and mid cap names that Derek Johnston finds are some hidden gems: “…Another name that fits is a company called Neogen (NASDAQ:NEOG), and Neogen is in the health care sector, and we’ve owned this since 2007 in our Small Cap strategy, and we’ve owned it since our SMid Cap’s inception. Neogen is based in Lansing, Michigan. It started in 1982 with funding from the Michigan State University Foundation, and what they do is they provide a broad line of food and animal safety solutions, which include things like diagnostic kits, vaccines, cleaning agents, veterinary instruments — a number of those types of products.”
To get the detail on CoStar and Neogen investments, and recommendations on many more, read the entire interview at the Wall Street Transcript.