67 WALL STREET, New York - March 27, 2014 - The Wall Street Transcript has just published its current Investing Strategies Report offering a timely review of top stocks for serious investors. This special feature contains expert industry commentary through in-depth interviews with highly experienced professional Money Managers. The full issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
Topics covered: Secular Growth Themes - Global Growth Equities - Dividend-Paying Stocks - Large-Cap Growth - Capital Appreciation - Basic Needs Investing - Investing in Stable Economies - Investing in the Swiss Market
Companies include: Kimberly-Clark Corporation (KMB), Monsanto Co. (MON), The TJX Companies, Inc. (TJX), Chart Industries Inc. (GTLS), O'Reilly Automotive Inc. (ORLY), VF Corp. (VFC), Google Inc. (GOOG), Crown Castle International Cor (CCI), American Tower Corp. (AMT) and many others.
In the following excerpt from the Investing Strategies Report, an expert portfolio manager from Hermes Global Equities discusses his investment methodology and top stock picks for investors:
TWST: Can you provide us with an overview of the investment philosophy and strategy for Hermes Global Equity Select Fund?
Mr. Devlaminck: We started the portfolio at the end of 2009, and it is basically a highly concentrated bottom-up global equity product, similar to a strategy my team and I have run since 2004. It's based on fundamental bottom-up analysis, so it's a pure stock-selection product. We have some sector and region restrictions, but they are reasonably broad, so we can we can go almost anywhere in terms of sectors or regions. Given the concentrated nature of the portfolio and our own history, the portfolio typically has a growth and quality bias to it.
The philosophy is based on three simple beliefs. We are primarily looking for companies with what I would call a persistent competitive advantage and sustainable future growth capacity. Basically we are looking for visible profitable growth. Second, we think that fundamental bottom-up, sector-based research is the best way to go and identify these types of companies. The team is organized along global sector lines, and the different members of the team have responsibility for one or more global sectors. Given that the world is getting more and more global, or business models travel across the globe, being organized this way gives you much more leverage on the research efforts rather than through a regional specialization.
Thirdly, we strongly believe in a more concentrated approach, basically put the money where your mouth is. There is a big risk of overdiversification, I would say, in a lot of products out there, so for me it's about conviction in the companies that you select and then combining them efficiently in a highly concentrated portfolio so you don't need too many names to manage the overall risk of the portfolio.
If you have too many names, one, you can't cover them, or you don't have the same level of conviction in the names; secondly, you also kind of carry a lot of dead weight in the portfolio. So you are losing out or cutting yourself short on the opportunities that you have for those stocks that you truly believe in. As long as your portfolio is very well-constructed, as long as you don't have all the same types of stocks in your portfolio, you can manage the absolute and relative volatility pretty well with, let's say, 40 to 45 names in the portfolio.
TWST: Is that about the size of your portfolio today?
Mr. Devlaminck: Yes. We are targeting a range currently of between 40 and 45 names globally.
TWST: How much of the portfolio is in the U.S. versus outside the U.S.?
Mr. Devlaminck: We are currently slightly overweight to North America. In the last three years we have been overweight the region, which was the right call. But I don't manage the product by saying, "And now we are all going to the U.S. or we are going to China or Brazil." It's basically the individual stock decisions that generate the geographic or sector exposure that we have. But in the last three years, we found more opportunities in the U.S. And if you look at the economic environment, it's not that surprising where the more visible quality growth was apparent.
Recently we are finding more names outside of the U.S., so we are gradually increasing Europe, Southeast Asia a little bit and Japan. Actually, Continental Europe is now actually our bigger overweight. North America has gradually been coming down in the last six months and replaced by opportunities we have seen in Continental Europe.
TWST: Can you give us some examples of the holdings that you are now focusing on in Continental Europe? What's been attracting you there?
For more of this interview and many others visit the Wall Street Transcript - a unique service for investors and industry researchers - providing fresh commentary and insight through verbatim interviews with CEOs, portfolio managers and research analysts. This special issue is available by calling (212) 952-7433 or via The Wall Street Transcript Online.
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