|Forbes.com, Fall, 2012. This article was written with Oliver Pursche, the Co-Portfolio Manager of GMG Defense Beta Fund. It was part of a series of articles developed under an agreement with forbes.com to work with a variety of contributors and assist them in delivering actionable investment ideas each week. The site, forbes.com is one of the top 500 sites in the world with nearly 10 million subscribers and nearly 100 million page views a month.|
Sir Isaac Newton’s theory of gravity took hold last week and so far this week, as markets, demonstrated by the S&P 500 (SPY), have continued to sell off, it seems to me, largely on fears of the impending fiscal cliff and the implications of the U.S. economy riding merrily off of it.
All that said, Newton’s ideas about gravity are not the only immutable laws of physics at our disposal. Specifically, the first law of thermodynamics states that energy can neither be created nor destroyed, but merely changes in form.
When applied to the markets and economics, the first law of thermodynamics suggests one company’s loss of market share, revenues, etc, is – somewhere in business cosmos – another company’s gain.
QED, the companies listed below have over the past several years been able to grow their revenues, presumably, at the expense of a (possibly hapless) competitor. In a growth challenged world, zeroing in on companies that have demonstrated growth and are projected to continue growing, could bear fruit.
Here are five of these companies we’ve recently bought for the Beta Fund (MPDAX):
Bed Bath & Beyond (BBBY) has a A++ financial strength rating by Value Line and is expected to grow its revenues by 11.5% next year.
Cognizant Technologies (CTSH) , an IT Consultancy and software outsourcing firm, also has a A++ rating by Value Line and is expected to grow revenues by 21.5% in 2013.
Novo Nordisk (ADR) (NVO), has a respectable dividend of 1.72%, boasts a A+ rating by Value Line and is expected to grow revenues by 11.5%
Schlumberger Ltd (SLB) also pays a dividend (1.62%), has an A++ rating and is expected to grow revenues by 14.5% next year.
Kohl’s (KSS) also makes the list with a 2.46% dividend, A+ rating and an expected revenue growth rate of 11%.
With Chinese and U.S. economic data improving, European debt concerns easing, and consumer sentiment reaching its highest level in five years, the stock market is one piece of legislation away from a potentially significant bull-run.
Parenthetically, I might mention the spending cuts and tax increases were designed precisely to attack the deficit problem, and that both measures are – in theory – exactly what the country needs. Backing down from real deficit reduction measures when they are finally at hand seems to be nothing but a game of kick the can. Seriously, did we think that deficit reduction was going to be easy and without consequence?
Nevertheless, should we avoid the fiscal cliff, making real or imagined progress on the deficit – I’m not sure it matters which – demonstrable growth could pickup in the second half of 2013, as I expect it will, and these companies should have a leg-up on many of their rivals.