What are we looking for?
This is our second look this week at what some portfolio managers are buying. It's worth checking out the top securities of funds to get investment ideas, or gain comfort that a pro has put money in a stock you may like.
Today, we look at the Trimark U.S. Small Companies Class. You can check out the stocks at Invesco Trimark Ltd.'s website at invescotrimark.com. We were able to get the holdings to Nov. 30.
More about the fund
Robert Mikalachki has been the lead manager of the $92.5-million Trimark U.S. Small Companies Class fund since 2003.
The small- to mid-cap equity fund gained 33.9 per cent for the year ended Nov. 30, compared with 6.4 per cent for the Russell 2000 Index in Canadian dollars.
The value-oriented manager owns 20 to 30 stocks in the fund. "We are drawn to a business that has some meaningful ... differentiation from its peers," he said. "We are very interested in companies that are going to grow. We are not trying get some second-class business at 80 cents to a dollar."
What did we turn up?
Some stocks like Smart Modular Technologies Inc. and Tempur-Pedic International Inc. have already had eye-popping triple-digit gains so far this year.
Other stocks with potential include Kinetic Concepts Inc., a medical technology firm that is a global leader in acute wound-care treatment, he said.
The firm has a 90-per-cent share in this market, and is expanding into areas like Japan, which is an "important growth driver," he added. "Five years from now, you could see this company doing probably $8 (U.S.) a share in free cash flow from $4 this year."
Another top holding is International Rectifier Corp., which makes power semiconductors used in everything from hybrid cars and servers to gaming consoles, he said. "They have made a generational breakthrough in using a different substance for their chip." Instead of using silicon, the company is able to make chips using gallium nitride to increase power efficiency, and will start commercializing this innovative technology next year, Mr. Mikalachki said.
"If you look out three to five years, they will do $3 to $4 in cash flow per share," he predicted. "The company also has no debt, and also $8 to $9 a share in cash on the balance sheet. It's a bit of a hidden asset."
Another top holding is BrightPoint Inc., which has become the largest distributor and logistics provider of cellphones in the world by acquiring the biggest European player. The company, which has lowered costs by going through a restructuring this year, also has little debt, he said.
"In three to five years, there is no reason why it couldn't be doing $1.20 to $1.40 in cash flow per share."
|Top holdings for Trimark U.S. Small Companies Class to Nov. 30, 2009|
|Company name||Ticker||US$ Price Dec. 7||52-wk high $||52-wk low $||YTD % price chg||% yield||P/E||Market cap ($-mil)||Volume||% security|
|Kinetic Concepts Inc.||KCI-N||34.92||39.25||17.86||82.1||0.0||10.0||2,481.4||379,690||9.51|
|FirstService Corp. *||FSV-T||19.15||22.94||9.50||19.8||0.0||0.0||563.8||19,505||5.08|
|Smart Modular Technologies||SMOD-Q||5.10||5.62||0.79||231.2||0.0||0.0||315.6||401,790||4.63|
|Tempur Pedic International||TPX-N||23.13||23.83||3.84||226.2||0.0||25.4||1,732.4||478,354||4.38|
|John Wiley & Sons||JW.A-N||38.98||39.19||26.19||9.6||1.4||0.0||2,323.6||134,648||4.37|
|* FirstService Corp. in Canadian dollars. All other stocks in U.S. dollars. Source: Globe Investor|
© 2007 The Globe and Mail. All rights reserved.
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