67 WALL STREET, New York - May 28, 2014 - The Wall Street Transcript has just published its Investing Strategies Report. 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 - Small Cap Investing - All-Cap Investing - Bottom-Up Stock Selection - Quality of Business - Growth at a Reasonable Price - Long/Short Strategy - Investment Risk/Return
Companies include: Synaptics Inc. (SYNA), Illumina Inc. (ILMN), Quest Diagnostics Inc. (DGX), Alexion Pharmaceuticals, Inc. (ALXN), Royal Caribbean Cruises Ltd. (RCL), O'Reilly Automotive Inc. (ORLY), CIGNA Corp. (CI) and many others.
In the following excerpt from the Investing Strategies Report, a highly experienced portfolio manager discusses her investing methodology and top stock picks for investors:
TWST: What are some of the secular themes that that played out well in 2013, and how is this evolving as we move into the second half?
Ms. Wehner: We have several themes throughout the portfolio. In fact, I could probably give you some kind of a secular theme for every company that we invest in. As I highlighted earlier, we like technology leaders. One of the themes we benefited from, and this isn't just last year but over the past couple of years, is mobile computing, especially the growth in smartphones.
We've done this through our investment in Synaptics (SYNA). The company is a leading developer and innovator of custom capacitive touch technology, so the touch feature on smartphones and tablets, as well as many other appliances and devices. It's been a strong performer for us, up 22% year to date and up about 120% over the last three years.
The company successfully leveraged its portfolio of patented technologies into fast-growing markets like smartphones and tablets, and works with almost every major OEM. Last year, adding to this growth, it made a strategic acquisition of a company called Validity, which is a leader in mobile biometrics or fingerprint technology. The acquisition further enhances its competitive position and provides them with a new platform for growth. The biometrics product cycle is expected to really kick in the second half of this year as phones with this security feature are expected to grow from 30 million units today to over 500 million in the next three years, so there's a lot of growth in this company going forward.
It has a strong balance sheet with $390 million in cash and no long-term debt. In our opinion, the valuation is reasonable at 14.3 times this year's earnings estimates versus peers at 16.8 times. So it's one example that leverages a theme.
Another one we've been investing in for a while is a company called Illumina (ILMN), which is a medical technology company that's a leader in instruments used in genetic sequencing. DNA sequencing is a rapidly growing segment within health care, as the industry moves toward what we've all been hearing about in personalized medicine. The company has developed a comprehensive line of instruments that serves a diverse group of health care institutions, from genomics research centers and biotech companies to clinical labs like Quest Diagnostics (DGX). The technology is used in drug development and more recently in the development of molecular diagnostic tests for such things as noninvasive prenatal testing.
Increasingly, genetic sequencing is being used in oncology to diagnose and to treat patients. Year to date, the stock is up 27%, and over the past five years the stock has appreciated over 270%. What's really exciting is the company continues to innovate. They introduced 12 new game-changing products and services at the beginning of this year, which solidifies their technology lead in this space where they face very little competition. We expect the momentum to continue for the company in this subsegment of health care, which is conservatively estimated to reach about $20-plus billion in the next couple of years.
TWST: Also among your top holdings you have Catamaran and Alexion Pharmaceuticals; what attracted you to those stocks? What do you like about them?
Ms. Wehner: I'll talk about Alexion (ALXN) first...
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.
- Alexion Pharmaceuticals
- Illumina Inc.