Avago McKesson Names In A Top Stock Mutual Fund
Post on: 16 Март, 2015 No Comment
E ric Fischman and Matt Sabel, co-managers of MFS Growth Fund. are road warriors.
To find the stock investment ideas with durable growth that they seek, they see dozens of companies each week, Sabel says.
And that means frequent travel. Sabel says he’s on about 80 flights a year, traveling up to half of each month. It’s worth it, Sabel said. We don’t want companies that can grow just a quarter or two.
The stock mutual fund started its current stake in Avago Technologies (NASDAQ:AVGO ) in December. Earnings-per-share growth for the designer of analog integrated circuits has accelerated for six quarters in a row.
Before buying Avago, Sabel and Fischman had to resolve concerns that Avago’s chips could be designed out of key products, such as Apple (NASDAQ:AAPL ) smartphones. That was mitigated by their acquisition of LSI (a designer of semiconductors and software), Sabel said. That bolstered their product line and allowed them to be more than a one-stop shop.
The $12.1 billion fund increased its stake in McKesson (NYSE:MCK ) in October and again in December. McKesson distributes drugs and medical supplies and equipment.
They make more money on generics than brandeds, so as drugs come off patent, McKesson benefits, Sabel said.
Sabel adds that McKesson could benefit from so-called bio-similars. These are essentially generic versions of biotech drugs that could come to market in the next three to five years, he said. If they do, McKesson could benefit from distributing them.
Trendy Tailwinds
The company also stands to benefit from secular trends. Aging of baby boomers and the Affordable Care Act’s expansion of Medicare eligibility should also benefit McKesson, Sabel says.
Paint company Sherwin-Williams’ (NYSE:SHW ) EPS growth has accelerated for four quarters. They have been a long-term grower, Sabel said. We are in the upswing of a housing cycle. Things haven’t gotten to levels we saw in 2005-’06-’07, but things are getting better. They have been an above-average grower for some time and we’d like to stick around for that. And this company has done well even in downturns.
The fund’s stake in Cerner (NASDAQ:CERN ) rose in December and October.
The medical software maker is surfing a wave of computerization of medical records. Increasingly, payment for health care is based on performance. That requires digitizing patient information.
But systems that many hospitals use are antiquated, Sabel said. And small information technology companies often don’t have the resources to provide comprehensive solutions. Cerner has been able to integrate the steady flow of new health rules into its software, Sabel says, and the company gains share as small rivals fail.
Sabel also likes the outlook for LinkedIn (NYSE:LNKD ). They are one of the few Internet stories with a recurring revenue stream, he said.
The company makes money from employer advertisements and its role in recruiting talent.
It also makes money from people hoping to be recruited.
The fund has had its ups and down over the years in terms of performance relative to its peers and the S&P 500. It carries an A rating from IBD for 36-month performance. Its average annual return of 10.19% for the past 10 years is ahead of the 8.51% for its large-cap growth peers tracked by Morningstar Inc. and 8.13% for the S&P 500.