The Future Is Now For Victory Fund

Globits is chief investment officer of mid-cap strategy at Victory Capital Management, and manages $917 million Victory Special Value Fund (NASDAQ: - ).

"We try to invest in those areas of the economy that haven't been picked up by the Street," he said. "We look for trends that will grow over time."

The approach, Globits says, is to look at trends in the broader economy and what industries are not getting a lot of analyst coverage yet. Then he asks which trends are likely to continue and what industries will benefit.

Lawsuits are a red flag for Globits. But litigation isn't an automatic disqualifier; there is a big difference between a product liability suit and a workers' compensation case.

The former can derail a business, while the latter is a limited and usually one-time cost.

Globits likes to meet managers, but he also likes to meet the company's accountants. That helps prevent surprises when earnings are reported.

A theme Globits thinks will become more important involves composite materials. The aerospace industry is using them more often in a bid to reduce weight and boost fuel efficiency.

In late 2006, he added a position in Hexcel (NYSE: - ), which was trading between 15 and 18. It's now trading at about 23.The stock has an IBD Composite Rating of 89. But earnings fell 5% last quarter on a slowdown in sales.

Putting A Lid On Costs

Another recent buy was Cerner (NasdaqGS: - ). Most of its business is helping hospitals and other medical practices cut the cost of record keeping.

As health care costs rise, any company that can provide a way to mitigate that is in a good position for years to come, Globits says.

The fund added the stock around the same time it bought Hexcel. It has risen from a range of 45-50 to 64. It has shown double-digit earnings growth every quarter since the middle of 2004.

Globits says he usually starts positions at between 0.5% and 1% of assets. The most any one stock can take up is 5%, and he will trim them to keep to that number if they appreciate.

His visions of the future aren't just limited to technology. Social changes can also drive stocks.

Principal Financial Group (NYSE: - ) and Nationwide Financial Services (NYSE: - ) are two stocks that will benefit as the population ages.

That's because both companies provide 401(k) plans and services. With more older people in the population, retirement plans and their attendant services will be a bigger source of revenue.

Fewer people have pensions, and more workers will have to put money in their 401(k)s in order to save for retirement.

Their businesses will also get a boost from the Pension Protection Act, signed by President Bush in 2005. The act makes it legal for employers to automatically sign up employees in their 401(k)s.

Those three trends mean an automatic revenue increase for the two financial firms, Globits says.

Nationwide has been in the fund longer, about two years. Globits says he bought it before the PPA was signed into law.

It has risen from under 40 to about 55. The stock has an IBD Composite rating of 56. It topped in June and sold off 30% by mid-August. It's rallied 20% but is still 15% off its high.

Taking It Higher

Globits picked up Principal late last year when it traded in the upper 50s. It's now trading at about 64.

While the stock has had a wild ride due to the subprime crisis, earnings have been increasing for three years running. But quarterly earnings have sputtered in recent quarters, toggling between 20%-plus and the low single digits.

Globits says Nationwide is a more defensive stock than Principal, but he sees more growth potential for Principal.