David Fingold, vice president and portfolio manager at Dynamic Funds
FOCUS: U.S. & global equities
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MARKET OUTLOOK

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 3-5 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 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: defence (Raytheon, Elbit), construction (Belimo, GCP, Geberit), semiconductors (Inficon, Taiwan Semi), automation (Keyence, Cognex), 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: natural food ingredients (Sensient, Frutarom), coffee (Strauss), medtech (Hoya, Straumann), health insurance (United Health), private banking (First Republic), property & casualty insurance (Allstate) 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. We are presently negative about commercial aerospace, automotive, energy, telecommunication and mining, and therefore we have no investments there at all. We are also concerned about the extremely high valuation and lack of growth of companies in the utility, REIT and telecom industries, and therefore we have no investments there either.

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 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

KEYSIGHT TECHNOLOGIES (KEYS.N)
KEYS provides electronic test equipment. The majority of their business supports wireless network and 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 defense electronics. They are one of a small group of companies that provides equipment to test and design electronics used in defense 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 was spun out of Agilent in 2014.

ELBIT SYSTEMS (ESLT IT)
A Haifa, Israel-based manufacturer of military hardware. Their product lines include unmanned systems, electronics including fire control, software designed radios and radars, and cyber. The cyber division supplies signals intelligence hardware and software used by the military and domestic security forces of friendly nations. Elbit is well-positioned to benefit from the growth of unmanned systems, including the replacement of older drones. They are global leaders in software-defined radios. Generally, electronics spending grows at twice the rate of the growth of defense budgets.

KEYENCE CORPORATION (6861 JP)
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 has become 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 are a fabless semiconductor company and designed many of the chips in their devices.
 

PAST PICKS: MARCH 27, 2017

BELIMO HOLDING AG (BEAN.SWX)

• Then: CHF 3,351
• Now: CHF 3,900
• Return: 16.38%
• Total return: 18.89%

PARKER-HANNIFIN CORP. (PH.N)

• Then: $155.65
• Now: $158.26
• Return: 1.67%
• Total return: 2.09%

KEYSIGHT TECHNOLOGIES (KEYS.N)

• Then: $36.52
• Now: $41.78
• Return: 14.40%
• Total return: 14.40%

TOTAL RETURN AVERAGE: 11.79%
 

Fund Profile
Dynamic Global Dividend Fund
Performance as of: July 31, 2017

1 Month: Fund -1.1%, Index* -1.37%
1 Year: Fund16.3%, Index* 11.9%
3 Year: Fund 16.0%, Index* 12.3%
*Index: MSCI World Index Canadian dollar
* Reinvested dividends if any and net of fees.

Holdings as of June 30, 2017

1. Belimo Holding AG: 5.6%
2. Frutarom Industries Ltd.: 5.5%
3. Keyence Corp.: 5.3%
4. Elbit Systems Ltd.: 5.1%
5. Raytheon Company: 5.0%

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.

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TWITTER: @dfingold
WEBSITE: www.dynamic.ca