Full episode: Market Call for Monday, October 29, 2018
David Fingold, vice-president and senior 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), 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 (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 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 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.
STRAUSS GROUP (STRS IT)
Based in Petah Tikva, Israel, Strauss is a manufacturer of Middle Eastern salads and dips, coffee, water purification systems and 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 and 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.
SCHWEITER TECHNOLOGIES AG (SWTQ SW)
Schweiter is a Horgen, Switzerland-based manufacturer of plastic and aluminum composites. Their products are used for architecture, signage, transportation and wind power. Composites have superior strength-to-weight ratios to alternative materials and have insulating properties. They’re recyclable and use significant recycled content. In time, as building codes and other quality requirements increase, there’s increased use of composite materials. Recently, the company was growing revenues at around 10 per cent yearly. They maintain a significant net cash balance and can make further acquisitions.
LONZA GROUP AG (LONN SW)
Lonza Group is a Basel, Switzerland-based contract manufacturer of drugs including large and small molecules. They provide pharmaceutical companies with and end-to-end solution from trial quantities to finished pharmaceutical products. Their capabilities include highly potent active pharmaceutical ingredients, antibody drug conjugates, monoclonal antibodies, cell therapies, gene therapies and recombinant proteins amongst others. They’re also a significant producer of microbial control products and water treatment chemicals. The company has recently grown revenues at around 8 per cent yearly, with a return of over 28 per cent on net operating assets.
PAST PICKS: NOV. 21, 2017
HOYA CORPORATION (7741 TYO)
- Then: ￥5,815
- Now: ￥5,913
- Return: 2%
- Total return: 3%
HAMAMATSU PHOTONICS (6965 TYO)
- Then: ￥3,975
- Now: ￥3,620
- Return: -9%
- Total return: -8%
STRAUSS GROUP (STRS IT)
- Then: ILS 7,245
- Now: ILS 8,155
- Return: 13%
- Total return: 15%
Total return average: 3%
Dynamic Global Dividend Series F
Dynamic Global Dividend Fund Series F inception date March 2006. Portfolio Manager has been on the Fund since inception. Commissions, trailing commissions, management fees and expenses all may be associated with mutual fund investments. Please read the prospectus before investing. The indicated rates of return are the historical annual compound total returns including changes in unit values and reinvestment of all distributions does not take into account sales, redemption or option changes or income taxes payable by any security holder that would have reduced returns. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated.
Performance as of: Sep. 30, 2018
- 1 month: -0.75% fund, -0.28% index
- 1 year: 20.6% fund, 15.6% index
- 3 years: 17.4% fund, 12.8% index
Index: MSCI World C$.
Returns provided are net of fees.
TOP 5 HOLDINGS AND WEIGHTINGS
As of Sep. 30, 2018:
- Microsoft Corp: 4.9%
- MasterCard Inc: 4.9%
- Becton, Dickinson and Company: 4.8%
- Zoetis Inc: 4.8%
- UnitedHealth Group Inc: 4.6%