David Fingold, vice president and senior portfolio manager at Dynamic Funds

FOCUS: U.S. and global stocks

MARKET OUTLOOK:

We have no targets for market averages and do not manage money relative to the indexes. Our Funds, Dynamic Global Dividend Fund, Dynamic American Fund, Dynamic International Discovery Fund and Dynamic Global Discovery Fund invest in a concentrated portfolio of high-quality companies that we think will do well over the next 3-5 years. We also offer Dynamic Global Asset Allocation Fund, a balanced fund with a concentrated portfolio of equities and fixed income.

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 luxury goods (LVMH, Hermes), medical devices (Hoya), sensors (Halma, Hamamatsu Photonics), construction (Belimo, Sika), defense (Elbit Systems, Teledyne), semiconductors (Inficon, ASM Lithography), 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 cosmetics (L’Oreal), distilled spirits (Campari), coffee (Strauss), retail (Costco, Target) 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. The fixed income positioning of Dynamic Global Asset Allocation Fund is zero weight corporate bonds and no exposure to duration. 

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:

Hoya Corporation (7741 TYO)

Hoya Corporation is a Tokyo, Japan based producer of optical products. They are a leader in health sciences including endoscopes and lenses for vision correction. They also have a significant position in Information Technology. They dominate photomasks for the leading edge nodes of semiconductor manufacturing and hard disk platters for high capacity drives. They have an excellent long-term record of capital allocation including acquisitions, dividend growth and share repurchase.

Entegris Inc. (ENTG NASD)

Entegris Inc. is a Billerica, MA based company that supplies the semiconductor industry with Filtration products that purify gases, fluids, and the ambient fab environment, Liquid systems and components that dispense, control, analyze, or transport process fluids, Gas delivery systems that safely store and deliver toxic gases, Specialty chemistries for deposition and cleaning at advanced nodes, Wafer carriers and shippers that protect semiconductor wafers from contamination and breakage. As we move to the next production nodes (3D memory, leading edge logic nodes) their opportunity and profitability should increase. 

First Republic Bank (FRC NYSE)

First Republic Bank is based in San Francisco, CA and is the United States’ leading private bank. Founded in 1985 they became the 14th largest bank in the USA last year. Led by founder James Herbert, First Republic provides banking and wealth management services to affluent individuals and families, leading the industry in growth and credit quality. Since the IPO in 2010 the bank has grown its loans and assets at approximately 20 per cent per year. It’s Net Promoter Score leads the banking industry and is twice the average of the banking industry. Tangible book value has grown at 14 per cent per year since the IPO. 

PAST PICKS: August 31,2020

Lowe’s Corporation (LOW NYSE)

• Then: $164.69
• Now: $191.97
• Return: 17%
• Total Return:  18%

Sika AG (SIKA SWX)

• Then: CHF 216.60
• Now: CHF 323.80
• Return:  49%
• Total Return:  51%

Synopsys Inc. (SNPS NASD)

• Then: $221.30
• Now: $292.25
• Return:  32%
• Total Return:  32%

Total Return Average:  34%

Company Twitter Handle: @DfingoldDynamic