Charlie Bobrinskoy is vice-chairman and director of research of Ariel Capital Management, and co-portfolio manager, Ariel Focus Fund.
(ACN-NYSE) $37.24 (U.S.)
Accenture is the old Arthur Andersen consulting business, which provides information technology services to many of the world's largest companies. The company continues to post excellent operating results. "We believe the market is underestimating Accenture's global diversification and its large, multiyear technology engagements."
Toyota (TM-NYSE) $105.86
Toyota continues to outperform. BusinessWeek recently rated Toyota the sixth best brand in the world ahead of names such as Disney and McDonald's. The stock decreased by 20 per cent this year over concerns about Toyota's U.S. exposure. However, Toyota continues to increase sales and profit despite a slowdown in the U.S. auto market. It has a great reputation for fuel economy and the environment.
UBS AG (UBS-NYSE) $45.31
Swiss-based UBS is the world's largest asset management company. Leading asset management firms trade for 18 times forward earnings or more while UBS is currently only at 10 times earnings. Since May, 2007, the stock has declined from $65 (U.S.) to $45 based on significant writedowns in its mortgage portfolio. While these losses are real, they do not affect the core UBS asset management and private banking businesses, which generate the majority of UBS profits.
"In June, we at Ariel were concerned that the availability of easy credit and ample liquidity was causing investors to overlook substantial risks, particularly in the overly optimistic high-yield bond and leveraged loan markets. In fact, we felt that people were foolishly jumping into oversized risks without being rewarded accordingly. Now, only six months later, the situation appears to have changed significantly.
"Our strategy for 2008 is to invest in those high-quality companies that are currently, in our view, being excessively punished as a result of the market's recent turmoil."
© 2007 The Globe and Mail. All rights reserved.
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