David Driscoll, president and CEO of Liberty International Investment Management Inc.
FOCUS: Global equities
This is the time of year to add money to your portfolios. That’s because calendar returns from October to October rather than January to December tend to be above-average, especially among the small-cap stocks. Looking at our global stock holdings, the average growth rate from October to October since 1990 has been 21 per cent. This compares to the index averages of 8 per cent. We believe that’s a significant number. Does it always grow at this rate if money is added each October? No - the success rate of the past 27 years has been about 75 per cent (18 of 27 years), but the odds do favour the investor.
Given that, in our opinion, the markets are expensive, we take our time with new clients’ money. Some firms may invest all the money immediately because they counsel against trying to time the market, but in times like these, we believe that some prudence is required. Usually half positions are purchased in equities, with the remaining 50 per cent allocated later depending on what happens in the market.
An engineering firm that makes fuses and sensors for the automotive, consumer electronics and industrial markets. With the coming electrification of the world, demand for fuses and sensors should continue to rise. The stock fell today as a recent acquisition that accounts for a third of the size of the company’s revenues held back earnings and the market pushed the stock 10 per cent lower. To me, this is a gift to buy a solid free cash flow generating firm at a cheap price. We’re in year four of hopefully a 20-year holding period for Littelfuse. Earnings expectations are for mid-teens annual growth, well above average.
INTERTEK GROUP (ITRK.L)
Offers product inspection services such as textiles, toys, chemicals, electronic products, building materials and agricultural products for governments, importers and exporters. Worldwide demand for product safety has increased materially and Intertek expects both its profits and dividends to grow in the 20 per cent range for the next decade.
Provides pest control services (Orkin is their most notable subsidiary) in the U.S., Canada and Mexico. After floods and earthquakes, as we’ve seen in Mexico, and floods caused by hurricanes in Texas and Florida, pest populations grow, causing infestations. This includes ants, rats, termites and the like. From a valuation standpoint, the stock is expensive but it’s the only game in town for pest control.
PAST PICKS: NOVEMBER 14, 2016
An engineering, architecture and related professional services enterprise. They have aggressively moved into environmental engineering and water management, thanks to its March 2016 purchase of MWH Global Inc. It recently followed up with its purchase of North State Resources to bolster its environmental service presence across northern California and the western United States. Recent profits have improved and so has the stock price, from a November 2016 low of $28.74 to its current price.
- Then: $34.34
- Now: $36.54
- Return: 6.40%
- Total return: 7.92%
THERMO FISHER SCIENTIFIC (TMO.N)
Makes scientific instruments such as mass spectrometers and electron microscopes, consumables and chemicals for laboratory testing. Its latest development was the purchase of Patheon Inc. in May 2017, which is a contract manufacturer of pharmaceuticals that should help Thermo offer more business to its current clients in the drug industry. Recent growth to both revenues and profits has propelled TMO to new highs.
- Then: $148.02
- Now: $194.15
- Return: 31.16%
- Total return: 31.63%
HALMA PLC (HLMA.L)
A health and safety sensor technology group that makes products that detect hazards and protect people at work in public and commercial buildings. Sensors in elevators, smoke alarms and carbon dioxide detectors in buildings are some of their products. Today, the company announced its acquisition of Mini-Cam Enterprises, which is expected to fit very well into the water technologies cluster within environmental and analysis. This should lead to higher revenues and earnings, which is why the stock price has reached an all-time high.
- Then: £980.00
- Now: £1,220.14
- Return: 23.74%
- Total return: 25.42%
TOTAL RETURN AVERAGE: 21.65%