Oliver Pursche, GMG Defensive Beta Fund
Pursche, manager of the GMG Defensive Beta Fund (MPDAX), doesn't buy the wisdom behind "sell in May and go away," premised on slow summer months. Market timing is a futile exercise, he says, which is why he is sticking with a defensive stance. Specifically, Pursche is keeping a focus on large-cap multinationals, which are growing businesses aggressively in emerging markets, strong free cash flow and a history of increasing dividends.
With about $500 million in assets under management at his firm and about $20 million in the fund, the most interesting dividend name that emerged from Pursche's latest strategy session was Intel (INTC). Pursche says his team sticks with 15 names in the S&P 500 and S&P 100 that are the highest-yielding and high quality, which is why Intel comes as a bit of a surprise."You never think of Intel becoming a dividend aristocrat, but it's on its way," Pursche says. "It has underperformed the market and technology as a whole. It's a valuation play more than anything else. Intel is a core holding over the next 12 to 18 months, thanks to the 3.6% dividend. As a result of the recent selloff on the fears of supply-chain disruption in Japan, we think this is an attractive point to get in." Pursche notes that his firm is increasing rotation into some small-cap stocks in the biotech, pharmaceutical and technology spaces. "That's where the growth is, especially in the emerging markets," he says. But the firm's defensive stance has several other interesting large-cap names looking more attractive. Based on expectations of a full recovery in Japan, Pursche likes Cliffs Natural Resources (CLF), which is the world's largest iron ore producer. "They're very well positioned by having a lot of mines in Australia," Pursche says. "That's very favorable for the Asian infrastructure rebuilding and expansion. Once the issues in Japan stabilize, particularly the nuclear problems, iron-ore demand is going to continue to climb." Following consolidation among beer makers, Pursche says Molson Coors (TAP) has become one of the firm's unlikely picks. He points out that the company is well-positioned to pass on the costs increases in barley, hops and even water while also arguing that valuation is "pretty attractive." Lastly, Pursche says that farming-equipment maker Deere (DE) has done an "absolutely fantastic job at growing their businesses in Asia as well as Latin America." He says that the company has strong and growing profit margins, so despite share price appreciation, there is still upside left in the stock.
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