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The five favorite equities of Victor Zwart

21 May 2012, De Standaard

Every day, people try to reduce the risks of life to an acceptable level. At the same time, they try to profit from life’s chances. The same is true of asset managers. The impact of a sharp fall in equity prices should be limited as far as possible, while the effect of a period of rising prices should be exploited.

That sounds simple, but for many investors with assets under management, it is not so in practice.  The results achieved over the last ten or, more recently, five years unfortunately speak volumes.

Why have better investment results not been achieved? Don’t most investment institutions and private banks have first class analysts? That’s certainly true. However, asset management is not just a matter of finding the best equities. Nor is it enough to signal the existence of stronger or weaker economic momentum. What really matters is what managers do with this information; what decisions are taken.

Every week, Wealtheon’s analysts and investment committee assess how the economy is evolving in different regions of the world. Using an ‘anti-cyclical’ approach, any change in economic growth is signalled at an early stage. The same goes for sectors since, depending on expected growth, investors prefer some sectors to others.

Wealtheon’s focus lies on sectors which enjoy the preference of investors in times when economies are growing or are expected to pick up in time. Within these sectors, we choose businesses which draw a significant proportion of their revenues from emerging markets and countries with high growth. The value (price to earnings ratio) of the equity is preferably lower than growth in the long-term.

According to VICTOR ZWART of Wealtheon, an anti-cyclical approach lies at the basis of successful investment. And this was how he ended up with equities such as Apple and Furgo.

Fugro

Fugro is a Dutch research agency which collects and interprets data on the earth’s surface and geology. The company provides advice worldwide to the oil and gas industry and for the construction of large structures such as offshore platforms. Last year its turnover rose by 10 per cent. The management is optimistic about the outlook for the oil and gas industry, not least because of the stable price of oil and the expectation that in 2012 the global oil and gas industry will invest around 600 billion dollars in order to meet increasing demand for energy.

Wells Fargo

Wells Fargo is the largest mortgage lender in the USA. The company recorded a record profit in 2011. During the crisis in 2008, Wells Fargo took over the Wachovia bank, providing a substantial reinforcement of its distribution network. This takeover means that the bank operates in 39 of the USA’s 50 states. Results were better than anticipated in the first quarter of 2012. The mortgage sector in particular made a substantial contribution. Net profits grew by around 13 per cent, underlining Wells Fargo’s reputation for stable growth. Return on equity was 12 per cent, better than many banks achieve.

Apple

With a market capitalisation of around 525 billion dollars, the electronics group Apple is a behemoth. Innovative products such as the iPod, iPhone and iPad have been a success all over the world. Some analysts have doubts about Apple’s ability to keep coming up with new innovative products. For the moment there are enough products in the pipeline. The corporation has a low valuation and high growth. Its cash position of around 100 billion dollars is now being allocated as a dividend. We see the share price continuing to climb to 700 dollars.

DSM

The Dutch concern DSM produces high value materials and industrial chemicals. With sites on every continent, the company belongs among the world leaders. The division that makes vitamins, enzymes and food supplements has not as yet suffered from the weakened economic situation. The profitability of the foodstuffs division is holding steady.

With an estimated increase in profits of 13 per cent for 2013, a price-earnings ratio of 10 and a gross dividend performance of around 3.5 per cent, DSM remains attractively priced.

Qualcomm

The American company Qualcomm is a worldwide leader in mobile communications thanks to its own CDMA (Code Division Multiple Access) technology. The company develops, produces and sells digital wireless telecommunications products and services. The most recent figures from the end of March show a rise in turnover of 28 per cent and a record profit of around 2 billion dollars. For 2012 a turnover of 19.5 billion dollars is anticipated, thanks to the enormous growth in the Smartphone market for Qualcomm’s most important clients, Apple and Samsung.


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