Full episode: Market Call for Monday, March 25, 2019
David Fingold, vice-president and chief portfolio manager at Dynamic Funds
Focus: U.S. and global equities
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), defence (Elbit Systems), semiconductors (Inficon) and composite materials (Schweiter).
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 (Becton Dickinson), pharmaceuticals (Eli Lilly), payments (Mastercard and Visa) 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 and REIT industries and have no investments there. The fixed income positioning of the Dynamic Global Asset Allocation Fund is zero weight corporate bonds and has 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 and buy the index or use a closet index portfolio manager, taking 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.
KEYSIGHT TECHNOLOGIES INC. (KEYS.N)
Based in Santa Rosa, California, Keysight provides electronic test equipment. The majority of their business supports wireless network hardware development and deployment and will benefit from the rollout of 5G wireless. They also provide equipment used in testing and developing microelectronics. An important business segment is defence electronics as Keysight is one of a small group of companies that provide equipment to test and design electronics used in defence applications. They also provide some hardware used for signals intelligence. Originally founded by William Hewlett and David Packard in 1939 as Hewlett-Packard, it was spun out of Agilent in 2014.
HOYA CORP (HOCPY.PK)
Tokyo-based Hoya Corporation is a leading producer of optical products. The company is a leader in health sciences, including endoscopes and lenses for vision correction. It also has a significant position in information technology. Hoya dominates photomasks for the latest 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 repurchases.
STRAUMANN HOLDING AG (SAUHY.PK)
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 or to prevent tooth loss. The company has the leading global market share in implants, producing both titanium and ceramic ones. Recently it expanded its product line into partially tapered implants and clear aligners. They’re expected to launch fully tapered implants later this year.
Increased revenues from new products should expand margins. In recent quarters, Straumann has had double-digit growth and taken market share. The company has a net cash position and pays a dividend. Founded in 1954, current chairman Thomas Straumann is the grandson of the founder.
PAST PICKS: FEB. 21, 2018
STRAUSS GROUP (STRS TLV)
- Then: 7,402 Israeli shekels
- Now: 8,916 Israeli shekels
- Return: 20%
- Total return: 25%
- Then: $115.19
- Now: $99.23
- Return: -14%
- Total return: -12%
KEYSIGHT TECHNOLOGIES (KEYS.N)
- Then: $45.57
- Now: $84.22
- Return: 85%
- Total return: 85%
Total return average: 33%
Dynamic Global Dividend Series F
Performance as of: Feb. 28, 2019
- 1 month: 6.1% fund, 3.4% index
- 1 year: 9.4% fund, 3.8% index
- 3 years: 15.9% fund, 12.3% index
INDEX: MSCI World Index.
Returns are net of fees and distributions.
TOP 5 WEIGHTINGS AND HOLDINGS
- Mastercard: 5.0%
- Eli lilly and Co.: 5.1%
- Visa: 4.9%
- Microsoft: 4.9%
- Nike: 4.9%