Pax Global Opportunities Fund Company Examples
The Pax Global Opportunities Fund (PAXGX) invests in companies that are positioned to benefit from the transition to a more sustainable global economy. The following are examples and descriptions of companies in the Fund.
Xylem is a diversified global water technology company. It is the leading name in water pumps, valves and water testing, with important end markets in both developed countries and emerging markets. The main potential drivers for continued strong growth are new technologies, revenues from the aftermarket and service businesses, and emerging market opportunities. Merger and Acquisition (M&A) activities should contribute as the water sector continues to see corporate activity. Municipal capital spending on water infrastructure and demand from industry are seen as longer term supportive contributors. Interesting new technologies include award-winning storm water tunnels, submersible pump technologies for flash flooding, energy efficient waste water equipment that cuts energy use and therefore emissions by more than half, and advanced wastewater treatment solutions such as innovative mobile treatment containers. New water treatment and purification technologies allow increased water reuse, including for aquifer recharge. With a strong incumbent position in municipal, industrial, residential and commercial end markets, a global presence including in China, leading innovation incorporating digital technology and power optimization, and an excellent management team, Impax believes that this industrial company will deliver consistent growth.
HDFC bank began operations in 1995 with the mission to become a world-class Indian bank. It is well on its path to achieving this goal as the highest quality private sector bank in India – poised to capture the opportunity of still relatively low penetration and adoption of credit and bank accounts, with structural growth from the young and increasing population with rising incomes. HDFC has a deposit franchise resulting in a lower cost of funds than peers. This allows the bank to focus on retail lending, where it can earn attractive margins despite lower lending rates than in the riskier commercial sector. As a result, HDFC has a clean balance sheet and a low level of non-performing loans. The bank continues to take market share from competitors and is investing heavily in technology with a careful eye on costs. On the wholesale banking side, HDFC has a strong cash management product with a 22% market share. A strong management team with consistent execution, rising fee income, good asset quality, and a strong capital base make this a compelling and high-quality investment in the emerging markets financials sector.
Royal DSM NV
Headquartered in the Netherlands, Royal DSM is a science-based company active in health, nutrition and materials. DSM has been transforming its business model from its original cyclical chemicals roots to one based on advanced nutrition and performance materials with a very clear focus on sustainability. The company is focused on leading positions in high growth end markets, with a strong emerging markets share led by its operations in China. Close to three-quarters of DSM’s business is now comprised of natural food ingredients, human nutrition and animal feed. Other product lines are in personal care, healthcare, and a variety of high-end materials with applications ranging from electronics to textiles and construction. The Impax investment team believes that DSM is uniquely positioned through its impressive transformation and therefore differentiated from peers in the fine chemicals sector. With a visible path to steadier, less cyclical, expanding returns driven by the higher margin nutrition segments, DSM’s underappreciated attractive characteristics are growth potential, emerging market exposure, improving cashflow and returns on capital.
Aptiv is a global technology company that develops safer, greener and more connected solutions that enable the future of mobility. Aptiv is the former Delphi Automotive, post the spinoff of the powertrain segment, and has operations in 45 countries. Enhanced vehicle capabilities mean radar, lidar, high-speed sensors, vision, engine controls, networking systems – software complexity and computing power, all in real time. Vehicles are on their way to becoming a software-defined platform, akin to mobile supercomputers. Aptiv provides the advanced smart vehicle architecture and the connected mobility ecosystem at the forefront of smarter, automated and autonomous driving, safety, and infotainment. The company recently launched a fleet of autonomous vehicles in Las Vegas on the Lyft network. Passengers hail self-driving vehicles equipped with Aptiv technology in high demand locations. Aptiv has strong competitive advantages in the three key areas of autonomous driving, electric vehicles and infotainment systems, with the content and value per vehicle on a steadily rising trajectory. Guided by a strong management team, with strong free cash flow1 the company can benefit from M&A and further increase return on invested capital, which is already quite impressive. Emerging markets present an additional opportunity for growth and Aptiv’s end market is well diversified within the global auto sector.
1Free cash flow represents the cash that a company is able to generate after required investment to maintain or expand its asset base. It is a measurement of a company’s financial performance and health.
* Pax Global Opportunities Fund holdings as of 9/30/18.
Holdings are subject to change.
This information is not a recommendation to buy or sell any security.