June 10, 2023

  • Robert Stimpson has beaten 97% of his peers over the past 3 years.
  • Stimpson is co-CIO of Oak Associates Fund, which manages $1.4 billion in assets.
  • He shares with Insider 8 stocks he likes for the next 3-5-years.

Led by the River Oak Discovery Fund (RIVSXRobert Stimpson has beaten 97% of his peers over the past three years and 95% over the past half decade, according to Morningstar data.

This year his Live Oak Health Sciences Fund (LOGSX) is outperforming 97% of similar funds, and 93% over the past year.

But the outperformance hasn’t come as Stimpson frequently changes his sails to take advantage of any short-term headwinds, or diversify his funds for the sake of diversification. For example, he has distanced himself from energy companies on their performance this year and last year, as he believes that oil prices will face long-term downward pressure due to US political interests.

“We’re not afraid to expose sectors of the economy that we don’t think are going to be profitable to own long-term,” said Stimpson, co-CIO and portfolio manager of the Oak Associates fund, which manages $1.4 billion. wealth

Rather, it comes from Stimpson who may benefit from long-term macroeconomic trends and whose fundamentals appear to create favorable opportunities for returns over a 3-5-year horizon.

But further, the 25-year market veteran, who began his career as a financial consultant at Merrill Lynch, said he emphasizes quality when evaluating stocks to invest in. Quality stocks are those that generate strong and stable profits and high return on equity .

This is because companies that generate large profits are able to return funds to investors through dividends or share buybacks, which puts upward pressure on share prices.

He said focusing on quality stocks is also important to his and his firm’s strategy because of their preference for focused bets on certain areas of the market.

“We have to have a very high quality bias in our portfolio because we believe the volatility that cumulative risks add is exacerbated by an already concentrated portfolio,” Stimpson said. “So we want more blue chip, more stable growth.”

In addition to having strong profit margins, Stimpson also likes companies that show strong earnings growth.

“We believe that earnings growth is one of the most important drivers of shareholder value creation,” he said. “That kind of puts us more on the ‘enhanced’ side of the market.”

8 stocks Stimpson is betting on

Two sectors in the market with growth trends are technology and healthcare Stimpson lists stocks held in his fund from each sector that meet the above criteria and which he believes have strong growth potential over the next 3-5 years.

Within healthcare, Stimpson said he particularly likes large-cap biotech companies because they are cheaper than other growth sectors.

Two large-cap biotech stocks are the ones he’s betting on Amgen (AMGN) And Gilead Sciences (guild).

“From our perspective, these are both blue-chip household names,” Stimpson said. “We’re looking at high-single-digit free cash flow yields for both companies.”

In technology, Stimpson favors enterprise technology companies as opposed to consumer-facing companies, as he believes inflation is weighing on consumer demand and the pandemic has stimulated demand going forward over the past two-plus years. Enterprise technology companies will benefit from workers returning to the office, he said.

“We think the corporate world is getting back to normal, and the capital spending budget within enterprise IT is going to be higher as we get back to work,” he said.

Two institutions of his choice in this place oracle (ORCL) And cisco (CSCO).

He also likes semiconductor companies because he thinks they are oversold and undervalued. iShares Semiconductor ETF (SOXX) is down 36.5% year-to-date compared to 27.8% for the tech-heavy Nasdaq Composite. The sector has experienced disruptions to global supply chains, but Stimpson said he thinks the supply chain will normalize.

“Valuations have corrected rapidly, and we are seeing price-to-sales ratios of 3-5x across the sector,” he said.

His four preferred semiconductor companies include: Cirrus logic (CROSS), umbrella (AMBA), KLA-Tencor (KLA)And Kulike & Sofa Industries (KLIC).

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