David Fingold, vice-president and portfolio manager at Dynamic Funds
Focus: U.S. and global equities

MARKET OUTLOOK

As bottom-up stock pickers, we don’t make market calls. We have no targets for market averages and don't manage money relative to the indexes. We invest in a concentrated portfolio of high-quality companies that we think will do well over the next three to five years. Our most concentrated funds such as the Dynamic Global Discovery Fund own 20 companies, while a more diversified portfolio like the Dynamic Global Dividend Fund owns 25 companies. We also offer the Dynamic Global Asset Allocation Fund, a balanced fund with a concentrated portfolio of equities and fixed income.

When we own companies that are 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: Life science tools (Thermo Fisher), construction (Belimo, Sika), defense (Elbit Systems), semiconductors (Inficon), composite materials (Schweiter) and uniform rentals (Cintas).

Many of the industries we have invested in aren’t deeply cyclical. They include, but are not limited to:  Food ingredients (Chr. Hansen), coffee (Strauss), medtech (Straumann, Becton Dickinson), health insurance (United Health), animal health (Zoetis), payments (MasterCard), and pest control (Rollins).

When we’re negative about an industry, we don’t invest in it at all and assess the impact of negative developments in that industry on our other investments. We’re presently negative about commercial aerospace, automotive, energy and mining and therefore have no investments there at all. We’re also concerned about the extremely high valuation and lack of growth of companies in the utility, REIT and telecom industries and have no investments there. The fixed income positioning of the Dynamic Global Asset Allocation Fund is zero weight corporate bonds and no exposure to duration. Our favored currencies are the U.S. dollar, the Japanese yen and the Swiss franc.

Investors should consider whether they’re taking appropriate risks with respect to commodity prices, interest rates and currencies. Most investors don’t. They buy the index or use a closet index portfolio manager and take risks they don’t understand.

Simply put, we invest in companies we like and have no exposure to developments in the global economy that concern us.

TOP PICKS

STRAUMANN HOLDING AG (STMN SWX)

Headquartered in Basel, Switzerland, the Straumann Group researches and develops dental implants, tissue regeneration products and digital solutions for use in tooth replacement and restoration and tooth loss prevention. The company has the leading global market share in implants and produce both titanium and ceramic ones. Recently, the company expanded its product line into partially tapered implants and clear aligners. Later this year, they’re expected to launch fully tapered implants. Increased revenues from new products should expand margins. In recent quarters, they’ve had double-digit growth and have been taking market share. They’ve a net cash position and pay a dividend. Founded in 1954, current chairman Thomas Straumann is the grandson of the founder.

ZOETIS INC (ZTS.N)

Based in Parsippany, New Jersey, Zoetis is the largest animal health company in the world. They provide pharmaceutical and diagnostic products for both livestock and companion animals. Livestock herds grow with increasing population and increased protein demand. Companion animal populations have also been growing. The recent acquisition of Abaxis supports their growing diagnostics business with the addition of point of care diagnostic tools. The company has historically grown its revenues in the mid-single digits. Unlike the human pharmaceutical business, patent expirations and price pressure from payers aren’t detractors from revenue growth. Founded in 1952 as Pfizer Animal Health, the company has been independent since 2012.

STRAUSS GROUP (STRS IT)

Strauss Group Ltd. (STRS IT) based in Petah Tikva, Israel is a manufacturer of middle eastern salads and dips, coffee, water purification systems, sweets and salty snacks. Coffee is one of the fastest growing food categories. Strauss recently purchased full ownership of their coffee division, which is growing strongly in Eastern Europe and South America. The water division is growing strongly in Israel and Asia. The dips and spread business continues to be the North American market leader and has been expanding in Europe, Australia and New Zealand. The Israeli business is a leader in dairy, beverage and snack foods and participates in the strong growth of local consumption driven by immigration. Founded in 1933, its current chairperson is Ofra Strauss, the granddaughter of the founder.

PAST PICKS: OCT. 24, 2017

KEYSIGHT TECHNOLOGIES (KEYS.N)

• Then: $42.99
• Now: $60.19
• Return: 40%
• Total return: 40%

HOYA CORPORATION (7741 JP)

• Then: ¥6489
• Now: ¥6494
• Return: 0.1%     
• Total return: 1%

SENSIENT TECHNOLOGIES (SXT.N)

• Then: $77.37
• Now: $69.49
• Return: -10%
• Total return: -8%

Total return average: 11%