Full episode: Market Call for Tuesday, November 21, 2017
David Fingold, vice president and portfolio manager at Dynamic Funds
FOCUS: North American and global stocks
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 the 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), 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), property and casualty insurance (Allstate), animal health (Zoetis), payments (MasterCard) 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 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 also are not investing there.
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.
HOYA CORPORATION (7741.JP)
Based in Tokyo, Japan, it is the world’s low cost manufacturer of eyeglass lenses with plants in Thailand and the Philippines. They also produce endoscopes where they are a market leader. Their electronics segment includes photomasks and hard disk platters. They have expanded their hard disk platter business to a greater size range and have returned to growth. They have a focus on value creation and have consistently improved their growth profile and shareholder returns.
HAMAMATSU PHOTONICS (6965.JP)
Based in Hamamatsu City, Japan, it is a producer of tubes and semiconductor devices that produce and detect light and ionizing radiation. They have 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. The company recently commenced a share buyback.
STRAUSS GROUP (STRS.IT)
Based in Petah Tikva, Israel, it 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 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.
PAST PICKS: MARCH 27, 2017
BELIMO HOLDING (BEAN.SW)
- Then: CHF 3,351.00
- Now: CHF 4,339.00
- Return: 29.48%
- Total return: 32.28%
- Then: US$155.65
- Now: US$184.02
- Return: 18.22%
- Total return: 19.64%
KEYSIGHT TECHNOLOGIES (KEYS.N)
- Then: US$36.52
- Now: US$44.66
- Return: 22.28%
- Total return: 22.28%
TOTAL RETURN AVERAGE: 24.73%
Dynamic Global Dividend Series F
Performance as of: October 31, 2017
1 Month: 5.7% fund, 5.1% index
1 Year: 27.7% fund, 18.7% index
3 Year: 17.5% fund, 13.7% index
*Index: MSCI World Canadian dollar
*Net of fees, returns are shown
TOP HOLDINGS AND WEIGHTINGS
- Keyence Corp.: 5.7%
- Frutarom Industries: 5.5%
- Elbit Systems: 5.2%
- UnitedHealth Group: 4.7%
- BELIMO Holding AG: 4.7%
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.