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Number Cruncher

Blackstein portfolio plays on emerging tech trends Add to ...

What are we looking for?

What the pros are buying.

It’s worth taking a look at their top holdings to get stock ideas for further research, or as a way to research a fund. Today, we look at Dynamic Power American Growth at www.dynamic.ca.

More about the fund

The $472.4-million U.S. equity fund has been run by Noah Blackstein of Goodman & Co. Investment Counsel Ltd. since June, 1998. The A-version has posted a one-year return of 43.7 per cent compared with 9.9- per-cent for the S&P 500 Composite Total Return Index in Canadian dollars. Over 10 years, the fund has gained an annualized 2.6 per cent versus a 2-per-cent loss for the index.

The growth-oriented manager, who runs a concentrated portfolio of 25 names, is finding opportunities in consumer discretionary, technology and health care stocks.

Trends affecting the consumer sector include the growing demand for U.S. brands from emerging markets such as China, and a secular shift from bricks and mortar to Internet-based sales, whether it is Netflix Inc. (which he owns) or Amazon.com, he said.

Within the technology space, the interesting investments stem from a shift away from traditional structures such as on-site IT departments to cloud computing (which allows companies to store information remotely), from land-line to mobile phones, and from desktop computers to tablets, he said. In the health care sector, the opportunities are more company-specific as the pharmaceutical giants are gradually losing patent protection on more drugs, Mr. Blackstein added.

What did we find?

Triple-digit returns on most stocks over the past year.

Riverbed Technology Inc. and Fossil Inc. were up 174 per cent and 178 per cent, respectively, over the year ended May 23.

Mr. Blackstein still sees more potential in Riverbed, a network equipment maker that supplies a product known as “WAN [wide-area network] optimization” that speeds up the transfer of data. “It’s in the early stages and is a very fast-growing company,” he said. “They have executed well, and have no serious competition in this space.” Riverbed saw 85-per-cent growth in earnings for the quarter ended March 31 from a year earlier, while revenue was up 44 per cent.

Fossil, which sells its own line of luxury watches and other accessories and licenses names such as Burberry and DKNY, will benefit from the global expansion of its retail stores, and the enthusiasm of Asian consumers for its chic brands, he said. “The management team has also executed well.” Over the year ended March 31, earnings grew by 78 per cent, while revenue rose 34 per cent.

The manager also likes biopharmaceutical company Alexion Pharmaceuticals Inc., whose stock was up 90 per cent over a year. Its drug Soliris is used in the United States and Europe for the treatment of patients with paroxysmal nocturnal hemoglobinuria (PNH), but could be used to treat other blood disorders as well, he said. The company reported earnings growth of 76 per cent over the year ended March 31, while revenue was up 39 per cent.



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Join us for a live discussion Wednesday, May 25 at 12 noon ET with Steve Hansen, analyst with Raymond James Ltd.

Mr. Hansen was ranked for his accuracy in identifying winners and losers in the diversified industrials sector. He widely covers transportation and agriculture - and will answer your questions on selecting stocks within those arenas.





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