In Healthcare: In this sector the fund is taking some money off the table “We sold off C.R. Bard (BCR),” explains McIver. “It is a low cost provider but we had concerns about their execution as a business. We saw better growth opportunities elsewhere.” One top holding is Varian Medical Systems (VAR), a leading designer of radiation therapy services and equipment. Given the unfortunate rise of cancer, the firm has a real sweet spot as the market provider. Their business model also bodes well for its continued success: When a customer (hospital) buys a product they also purchase upkeep and training for its staff, providing annuity down the road.
Consumer Staples: There’s more opportunity here with brands and franchises, many of which are not new to the oversea markets. The Coca-Cola Company (KO), remains a favorite in that sense. According to McIver “North Korea and Cuba are the only two countries in the world where you can’t buy a coke. The strength of the brand and franchise is strong. The stock has high return on equity, rewards shareholders, grows their dividend, and has strong cash flow. As an investor, would you buy a 10-year U.S bond, which yields 1.65%, or Coke, with a dividend of 2.69%? Coke is clearly more attractive.”
Technology: Amphenol Corp (APH) is a leading designer and manufacturer of electric connectors. It’s a commodity-like business but they have positioned themselves to work with customers like Apple (AAPL), as well as bigger aerospace industries where they design connectors to improve efficiency. “We think it’s fairly priced to buy today. It tends to be more volatile because the market treats it so, but it has a lot of value and more growth to price in.”
Another technology stock in the fund is Waters Corporation (WAT), the leader in mass spectrometry. This is a process that measures and breaks down a substance’s compounds to identify and calculate all of its components. Healthcare companies have a great need for this technology, as do oil and gas companies which require this analysis for research.Lastly, Praxair (PX), a leading industrial atmospheric gasses company. “This is a real interesting play,” says McIver. “The firm builds and operates plants near customers that requires their gas. The business model is typically long-term contracts (3-20 years) with customers, which gives them a lot of security, so even if the customers don’t take the product they still have to pay, otherwise it would be too risky for Praxair to engage. Furthermore, the primary cost of its goods (air) is free. The by-products are other gasses that Praxair will bottle up and sell to another customer, while the first customer has essentially paid the industrial cost. Praxair plays on energy and the growing strength of the emerging markets, especially in Latin America where has seen a lot of success.” Advice for New Investors “Moving from one shiny thing to the next tends to be harmful to your financial health,” cautions McIver. “Risk is very much a word investors are concerned about. To us, risk is the permanent loss of capital. Our strategy is proven over time, with lower volatility and superior returns, but it takes patience. An investor must understand the strategy and stick with it because in the long term, it tends to be successful.”
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