Dessauer: Global Opportunities
03/07/2003 12:00 am EST
While others see global opportunities through research, John Dessauer actually travels the globe to personally uncover the world's best conservative growth opportunities. Here, he discovers his current favorites.
"I happen to think that because so many businesses are fixing their balance sheets – indeed, this has become sort of the rage among companies in the US in particular – that’s it’s time to buy a high-quality junk bond fund. That's where you will get the real big benefit. What I recommend is the Vanguard Corporate High Yield Fund (VWEHX). It’s a no-load fund and the annual running costs are 0.25%. It’s a $5 billion fund and it’s been run by the same manager since 1984. It stays in the shallow end of the pool, so there is not a huge risk. The yield is about 8½%. Coming out of the recession in the early 1990s, this fund produced a total return over three years of 75%. I think it could do that again.
"Here’s a stock that Warren Buffett liked, and the price is even better now. That’s H&R Block (HRB NYSE). Pretty soon we’ll all be doing our taxes and this is when H&R Block makes their money. The stock has been down, but I would consider it a conservative buy. I would say the same for Cardinal Health (CAH NYSE). Cardinal is a distributor of pills and other medical services. They don’t make the pills or products, and they don’t retail them. They are in the ‘sweet spot’ in the middle. The company has super management, a super record, and I think the stock can serve you well in the conservative part of you portfolio.
"If you want to take more of a chance, I think you should also have something in technology. I would recommend Scientific Atlanta (SFA NYSE). They make the equipment that the cable TV people need. These are the boxes that go on top of your TV. The cable world is going digital at an unbelievable rate and this should be very good for SFA. The company has no debt and out of the $12 stock price, $5 is in cash. The company also generates significant amounts of cash every quarter. For now, I think the stock market is just putting a nominal value on this company’s long-term business.
"I also like Cendant (CD NYSE). It’s in the travel business, which nobody likes now. They are also in the real estate market, and everyone seems to be waiting for a bubble to develop there. In the meantime, Cendant – even under all these circumstances – is generating significant cash flow. So here’s a company that is paying down debt aggressively and buying back shares.
"One final idea would be in the mortgage-banking area. If I am right about mortgage rates going down to 5% on 30-year mortgages, than the mortgage business will be better than expected. It will not be a boom like it was last year, but it’s clearly going to be better than expected. And the mortgage bankers will make more money than most now expect. One of my favorites is a bank called IndyMac (NDE NYSE). I’ve followed this company forever."