67 WALL STREET, New York - March 31, 2014 - The Wall Street Transcript has just published its Investing Strategies Report . This special feature contains 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: UBS AG (UBS), Credit Suisse Group (CS), ABB Ltd. (ABB), Novartis AG (NVS), Weatherford International Ltd. (WFT), Transocean Ltd. (RIG) and many others.
In the following excerpt from the Investing Strategies Report, an experienced portfolio manager for Swiss securities discusses his firm's investment methodology and top current stock picks.
TWST: I'd like to start with an overview of Swiss Helvetia Fund's investment philosophy and strategy.
Mr. Comby: We have two main approaches that we comment on regularly in our quarterly report to shareholders - the last one just came out in December and is available on our website.
One is the recovery approach, so basically it's value with catalysts, and the second one is undervalued growth. If I go a bit more in detail there, recovery is depressed or low valuation with catalysts at micro level, such as corporate restructuring, or macro level such as industry growth resumption after consolidation, or a combination of both. For corporate restructuring, it can also include change in management and so on.
The philosophy behind that is we think the market underestimates positive underlying changes in companies after it has had a series of negative corporate developments, so we think the mispricing is there. Then you see some positive underlying changes happening, and they're not coming up to the surface, showing up in the numbers yet. So that's one of the reasons why we look at that approach, because the market has, we believe, adaptive expectations; it doesn't reflect the underlying change right away.
For the other strategy, undervalued growth, we analyze the total addressable market for the company, the relevant end market for the company. In this approach we look for companies whose market size or growth is underestimated by investors, or companies increasing their share in a specific market. You can have of course a combination of both, expansion of the addressable market and the company gaining market share, which is a highly desirable situation as long as investors don't fully anticipate it.
And the philosophy behind this is that the market has a tendency to penalize in the short term a company that spends money for long-term growth, like high reinvestment rates and high capex. The market tends not to be very patient with those companies. So we think there is some value there and some mispricing there. Those are the two main strategies we have in the fund.
TWST: Could you give us some examples of the holdings in the fund that epitomize that philosophy?
Mr. Comby: In reporting we add an additional dimension to make it clearer, a dimension we track in performance contribution to assess how the strategies are doing: market capitalization. In the Swiss market last year, actually in the midcap area of the recovery, strategy was the main contributor to the performance of the fund. Amongst the strongest performers in the mid- and small-caps recovery strategy, you can find for example companies like Nobel Biocare (NOBN.SW) in the dental implant market; you have another company there, Swiss Life (SLHN.VX), it's mostly a domestic life insurance company; you have a good example in Meyer Burger (MBTN.SW) as well, which is a solar equipment company.
We have companies in the same market cap segment, which are represented on the undervalued growth like Lindt (LISN.SW), the chocolate maker, it's one of the 10 largest positions in the fund - we show our largest positions on our website on a monthly basis - and Burckhardt Compression (BCHN.SW), a gas compressor manufacturer. In large caps, the main recovery case we were looking at are the banks, basically UBS (UBS), Credit Suisse (CS), and a company like ABB (ABB) in electrical engineering and automation. In the undervalued growth segment, in the large-cap area, we basically have the pharmaceutical companies like Roche (ROG.VX) and Novartis (NVS), and the luxury goods companies like Swatch (UHRN.SW) and Richemont (CFR.VX).
TWST: What is your process for making investment decisions?
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.