Each week, a professional investor tells us where he'd put his money. This week:Graham Campbell, Saracen Global Income & Growth.
The objective of our fund is to provide a degree of income to investors and to build capital through investing in a portfolio of global equities. Businesses operate in a global environment and looking at their domicile is of little relevance. We aim to avoid risk by modelling a "worst-case" scenario into our valuation methodology and by sticking to strict sector limits. It is a high-conviction portfolio and we have a significant proportion of our personal savings invested in the fund. The following three companies are relatively recent additions to it.
Allied Irish Banks (Dublin: ALBK) has many of the features that we look for in a bank. It has successfully shrunk its balance sheet and reappraised its whole business strategy after the 2007-2008 global financial crash. There has been a change of management and the bank now has more than sufficient capital. AIB also has a leading position in the Irish banking sector and will benefit from accelerating economic growth, particularly for mortgages as demand for new houses picks up. The balance sheet is very strong. With minimal scope to spend cash on acquisitions due to competition issues, investors are likely to enjoy special dividends in the years ahead.
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Anta Sports (Hong Kong: 2020) is the most valuable sportswear brand in China, according to brand consultancy Interbrand. The firm is the fifth largest global sportswear brand by market value: 46% of sales are from footwear, 50% from apparel and just 4% from accessories. The main sports that Anta supports are basketball, football, running and cross-training. Anta targets the mass market, which represents around 60% of the total Chinese sportswear market. The business will benefit from economic growth in China and greater participation in active sports. The balance sheet is in net cash (cash on hand exceeds liabilities). While the dividend yield is less than 3%, we expect strong dividend growth in the years ahead.
Pandora (Copenhagen: PNDORA)designs, manufactures and markets a full universe of high-quality, hand-finished, contemporary and affordable jewellery. The firm's cornerstone product is the collectable charm bracelet, which was launched in 2000 and is complemented by a range of other jewellery. Its target customer base is women between 18 and 49 years of age. Pandora's products are sold in more than 100 countries on six continents through more than 8,000 points of sale and are also sold online.
After consultation with shareholders, management decided to alter the split between share buy-backs and dividends, which is resulting in a 300% increase in the dividend in 2017. The shares now look like a classic case of early growth investors selling and new income investors yet to find the business. The balance sheet is very strong and the yield approaches 6%. Management has also recently been buying shares.
Graham Campbell is co-manager of the Saracen Global Income & Growth Fund
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