Sentry fund built on U.S. 'quality' firms
What are we looking for?
What the pros are buying.
You can get investment ideas or research a fund by checking out the top holdings. Today, we look at Sentry U.S. Growth and Income Fund at sentry.ca.
More about the fund
The $233.6-million U.S. equity fund has been run by manager Aubrey Hearn of Sentry Investments since its inception in May, 2011.
The fund gained 9.1 per cent for the year ended May 31 versus 6.2 per cent for the S&P 500 Total Return Index in Canadian dollars.
He looks for companies in sectors where there is little competition, or are in oligopolies, and have a history of increasing dividends over time. He owns a couple of non-dividend-paying stocks such as Google Inc. in his portfolio of about 45 companies.
Mr. Hearn has become more cautious on the U.S. market because of headwinds from Europe's debt crisis, China's slowing economy and weaker job growth in the United States. But he is bullish on names in his portfolio. "We are trying to own quality companies," he said. "You can find world-class multinationals in the United States trading at 10 to 13 times earnings."
What did we find?
An eclectic mix of stocks, with Walt Disney Co. the best performer so far this year with a nearly 20-per-cent gain.
Mr. Hearn is also a big fan of Wells Fargo & Co. It is "one of the best run banks in the United States," he said. It has dramatically increased its share in the mortgage-loan business, and has successfully integrated Wachovia Corp., another bank that it purchased in the 2008 market downturn, he added. He has a two-year price target of $40 (U.S.) a share.
McKesson Corp. also has potential because it is the largest of three U.S. drug distributors that control 90 per cent of the U.S. market. The company also benefits from more drugs coming off patent protection because it gets more "negotiating power" when dealing with the pharmaceutical companies. "It has been able to raise prices," he said. His two-year target is $105 a share.
The manager also likes Microsoft Corp. "It has a dominant market share in personal computers - about 90 per cent - and has about $58-billion of cash on the balance sheet," he said. "The stock has done well since we have owned it, but not so well over 10 years." His two-year target on the stock is $40 a share.
TOP HOLDINGS FOR SENTRY U.S. GROWTH AND INCOME FUND AT MAY 31, 2012
|Company||Symbol||Price $ (June 5)||52-week high $||52-week low $||YTD price chg. %||One-year price chg. %||P/E ratio||Yield %||Market cap. ($ mil.)|
|Towers Watson & Co.||TW-N||59.40||68.18||51.70||-0.9||-2.6||18.1||0.7||4,234.6|
|Walt Disney Co.||DIS-N||44.84||46.10||28.19||19.6||13.8||16.3||1.3||80,369.4|
|Wells Fargo & Co.||WFC-N||30.52||34.59||22.58||10.7||16.2||10.5||2.9||161,047.2|
|Source: Globe Investor, Sentry. Figures in U.S. dollars|