David Fingold, vice president and senior portfolio manager, Dynamic Funds

FOCUS: U.S. and global stocks

MARKET OUTLOOK:

We have no targets for market averages and do not manage money relative to the indexes. Our funds invest in a concentrated portfolio of high-quality companies we think will do well over the next 3-5 years. We also offer Dynamic Global Asset Allocation Fund, a balanced fund with a concentrated portfolio of equities and fixed income.

When we own companies in cyclical industries, we do have a positive medium-term view of the industry. The industries we presently like include but are not limited to luxury goods (LVMH, Hermes), medical devices (Hoya), sensors (Halma, Hamamatsu Photonics), construction (Belimo, Sika), defence (Elbit Systems), semiconductors (Inficon, Texas Instruments, ASM Lithography), composite materials (Schweiter), and many others. Many of the industries we have invested in are not deeply cyclical. They include but are not limited to cosmetics (L’Oreal, Estée Lauder), coffee (Strauss), retail (Target) and many others.

When we are negative about an industry, we do not invest in it at all and assess the impact of negative developments in that industry on our other investments. The fixed income positioning of Dynamic Global Asset Allocation Fund is zero-weight corporate bonds and no exposure to duration.

Investors should consider whether they are taking appropriate risks with respect to commodity prices, interest rates and currencies. Most investors do not. They buy the index or use a closet index portfolio manager and take risks they do not understand. Simply put, we invest in companies we like and have no exposure to developments in the global economy that concern us.

TOP PICKS:

Hoya Corporation (7741 TYO)

A Tokyo, Japan-based producer of optical products. They are a leader in health sciences including endoscopes and lenses for vision correction. They also have a significant position in information technology. They dominate photomasks for the leading edge nodes of semiconductor manufacturing and hard disk platters for high capacity drives. They have an excellent long-term record of capital allocation including acquisitions, dividend growth and share repurchase.

Berkshire Hathaway (BRK/B NYSE)

An Omaha, Nebraska-based holding company with operations in domestic primary property and casualty insurance and global underwriting of reinsurance. Given the claims development in business interruption insurance and an elevated level of natural disaster claims we anticipate a firm pricing environment. They also own one of the nation’s largest railroads, BNSF, and have significant industrial operations at Marmon Corporation and will benefit from a growing economy. The company has a significant cash position and can drive earnings through acquisitions and stock buybacks.

Sika AG (SIKA SWX)

Sika, based in Baar, Switzerland, is a specialty chemical company. Its products are key to clients’ success but frequently represent less than one per cent of the cost of a product. The company’s customers rely on Sika for cement admixtures, sealants, membranes and adhesives. Key markets are construction, transportation and infrastructure. They have been able to generate returns on invested capital of over 20 per cent and operating profit margin in excess of 14 per cent while growing in the high single digits.

PAST PICKS: April 7, 2020

Hoya Corporation (7741 TYO)

• Then: ¥9659.00
• Now: ¥13,745.00
• Return: 42%
• Total Return: 43%

Strauss Group (STRS TLV)

• Then: 9091.00 NIS
• Now: 9165.00 NIS
• Return: 1%
• Total Return: 4%

Lonza Group AG (LONN SWX)

• Then: 404.80 Sfr
• Now: 560.60 Sfr
• Return: 38%
• Total Return: 39%

Total Return Average: 29%

Twitter @dfingold

Instagram @dlfingold

Website: WWW.DYANMIC.CA