Full episode: Market Call for Tuesday, April 10, 2018
David Fingold, vice-president and portfolio manager at Dynamic Funds
Focus: International equities
As bottom-up stock pickers, we don’t make market calls. We have no targets for market averages and do not 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 actively managed ETFs, including Dynamic iShares Active Global Dividend (DXG) and Dynamic iShares Active US Dividend (DXU) which have up to 25 company portfolios.
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: banking (JP Morgan), defence (Northrop Grumman, Raytheon), construction (Belimo), semiconductors (Inficon, MKS), automation (Keyence) and composite materials (Schweiter).
Many of the industries we have invested in aren’t deeply cyclical. They include, but are not limited to: natural food ingredients (Frutarom), coffee (Strauss), medtech (Straumann), health insurance (United Health), animal health (Zoetis) and payments (MasterCard).
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.
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.
KEYSIGHT TECHNOLOGIES (KEYS.N)
Santa Rosa, California-based Keysight provides electronic test equipment. The majority of their business supports wireless network and hardware development and deployment, which 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; they’re one of small group of companies that provides 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 Packard in 1939 as Hewlett-Packard, it spun out of Agilent in 2014.
KEYENCE CORPORATION (6861.JP)
Keyence is an Osaka, Japan-based manufacturer of sensors and machine vision system used in automation. The demand for automation is being driven by increasing requirements for product quality in excess of what humans are capable of. Also, as labour costs increase and skilled labour becomes increasingly difficult to obtain, the returns to automation investment have increased. While most of their customers are manufacturers, a growing segment includes warehouse automation. They're a fabless semiconductor company and designed many of the chips in their devices.
HAMAMATSU PHOTONICS (6965.JP)
Based in Hamamatsu City, Japan, this company produces tubes and semiconductor devices that produce and detect light and ionizing radiation. They've a leading market share in production of photomultipliers and scintillators. These products are critical components in life science tools, semiconductor capital equipment, measuring-while-drilling tools and high-energy physics projects.
PAST PICKS: JUNE 19, 2017
SCHWEITER TECHNOLOGIES (SWTQ.SW)
- Then: 1,297 Swiss francs
- Now: 1,138 francs
- Return: -10%
- Total return: -10%
KEYSIGHT TECHNOLOGIES (KEYS.N)
- Then: $37.99
- Now: $52.80
- Return: 39%
- Total return: 39%
HOYA CORPORATION (7741.JP)
- Then: ¥5626
- Now: ¥5516
- Return: -2%
- Total return: -1%
Dynamic Global Dividend Series F — won a Fundata Canada Inc. FundGrade A+® Awards for 2017
Performance as of: March 31, 2018
- 1 Month: -1.34% fund, -1.51% index
- 1 Year: 19.34% fund, 10.40% index
- 3 Year: 12.33% fund, 9.23% index
* Index: MSCI World C$.Performance is Total Return and net of fees – Series F
Holdings as of: Feb. 28, 2018
- Keyence Corp: 5.2%
- Frutarom Industries Ltd: 5.0%
- Raytheon Company: 4.9%
- JPMorgan Chase & Co: 4.9%
- UnitedHealth Group Inc: 4.8%
DISCLAIMER: Dynamic Global Dividend Fund Series F inception date March 2006. Portfolio Manager has been on the Fund since inception. Series F units are only available to investors who participate in eligible fee-based or wrap programs with their registered dealer. Commissions and trailing commissions are not payable on Series F units of the Funds but management fees and expenses may be associated with these investments. 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. Please read the prospectus before investing. Mutual funds are not guaranteed, their values change frequently and past performance may not be repeated. Dynamic Funds® is a registered trademark of its owner, used under license, and a division of 1832 Asset Management L.P.