A mixed bag of bargains
Description: Concentrated portfolio of 15 to 25 names, targeting undervalued companies with a competitive advantageWhen stocks are going up, it makes Larry Sarbit job more difficul michael kors outlet t. The chief investment officer at Winnipeg based Sarbit Advisory Services, which acts as a sub advisor to IA Clarington Investments, is currently more than 80% invested. That a sharp contrast to a decade ago, when cash positions in his portfolios climbed as high as 90%.
years ago, stocks were expensive, Sarbit says, pointing to the fact that Coca Cola Co. traded at 50 times earnings a decade ago. He bought it last year at 11 times earnings.
like volatility because it gives me opportunities when people are panicking as I get to buy bargains, Sarbit says. vast majority of people are using adrenaline to make decisions, but that not what rational businesspeople do. Occasionally these pullbacks affect an entire sector, but more often they impact individual companies.
As a result, Sarbit has put together quite an eclectic portfolio, including everything from Iconix Brand Group Inc. and Gap Inc., to Coinstar Inc. and Phillip Morris International Inc.
So while there is no central theme behind the stocks he favours, there is an important discipline in the characteristics of those businesses. They have to have a sustainable competitive advantage, predictable and repeatable business, and not require a lot of cash.
still finding individual companies that are cheap, have powerful brand names and offer a reasonable amount of certainty this is going to be the case in three or five ears. It got to be that simple, the portfolio manager says.
you know what you buying, you know the business is solid, and you have a pretty good idea what is going to happen, that a wonderful opportunity. doesn see the portfolio michael kors outlet as a mutual fund, but rather a business he is operating for profit. And by reducing risk, the manager feels he has a better chance of making money.
we do is about looking at what can go wrong, he says.
The position: Biggest position in the fund at more than 10%.
Why do you like it? Iconix owns the trademarks of 28 primarily apparel brands such as Joe Boxer and London Fog. It has built strong relationships by offering some of these brands exclusively to retailers such as Wal Mart Stores Inc. and Target Corp.
bought these brands up when they were less than hot, so they been able to buy them at reasonable or cheap prices, Sarbit says. reinvigorate the brands and re position them back into the market. believes the real power behind this model is the fact that Iconix doesn manufacture or distribute products, which is where all the costs are in the apparel business.
Biggest risk: If michael kors outlet the stock gets overvalued or its relationships with retailers deteriorates.
The michael kors outlet position: Slightly below 10% of fund.
Why do you like it? As a pharmacy operator, CVS Caremark not only benefits from running a very predictable business, but it is also less dependent on economic trends than other retailers are, Sarbit notes.
prescriptions filled is related to health issues, he says. got an aging population and people 65 and over take about three times more medication than the average. sees an opportunity in the company struggling pharmacy benefit management (PBM) business.
worst appears to be priced into the stock, he says. Biggest risk: If they can put the PBM business back on track, Sarbit expects it will either be spun off or sold.
The position: More than 7% of the fund. New position in past year, but has been added to in recent months.
Why do you like it? This professional services company biggest business is accounting, where it serves small and mid sized companies through its 50 to 60 offices across the United States.
been built by buying up local, well known accounting firms at reasonable or bargain prices. If you an accounting firm and you want to monetize the value of your business, CBIZ is one of the only companies that can do that for you. points out that this is not a capital intensive business, there is a high level of repeat business, and the stock is trading at a pretty cheap price of roughly 7 times last year free cash flow.