Pax Global Opportunities Fund Company Examples
The Pax Global Opportunities Fund (PXGOX) invests in companies that are positioned to benefit from the transition to a more sustainable global economy. The following are examples of companies in the Fund.
HDFC bank began operations in 1995 with the mission to become a world-class Indian bank. It is well on its way. It’s the highest quality private sector bank in India, and it is poised to capture the opportunities associated with still relatively low penetration and adoption of credit and bank accounts in India, with structural growth from the young and increasing population with rising incomes. HDFC has a best-in-class 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 as compared to the commercial (yet riskier) lending 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 percent 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.
Cadence Design Systems
Cadence is the leading provider of Electronic Design Automation (EDA) tools that are used for designing semiconductor chips and electronic systems. In the age of “connected everything,” this company provides some of the key architectural building blocks for the era of the Internet of Things. Cadence’s semiconductor design tools let enterprises introduce connected systems and machinery, which contribute to improved energy efficiency through reducing required inputs and increased productivity. Autonomous vehicles, home automation, 5G connectivity, factory and buildings energy management, data security, logistics and navigation, and smart cities all rely on increasingly complex systems, at the heart of which lie integrated circuits on semiconductor chips. Chip design tool companies operate stable business models with high barriers to entry due to the necessary high research and development (R&D) costs, which are enabled by substantial free cash flow. Synopsys and Mentor Graphics are the other two large players in chip design. With a unique business model that is agnostic in terms of individual software or hardware, Cadence designs whole electronics systems or individual chips, as well as increasingly small and complex integrated circuits, including those interacting with sensors. Mission critical technology for electronic systems across the entire electronics design chain with a loyal global customer base make Cadence an attractive U.S. information technology company.
Koninklijke DSM NV
Royal DSM is a large Dutch company focusing on science-based solutions in nutrition, health and materials. Products include food, beverages, animal feed ingredients, and materials such as those that improve industrial efficiency. With employees and offices around the world, DSM seeks to address three defining core areas: nutrition and health, climate and energy, and resources and circularity. A majority 70 percent of its business is now in natural food ingredients to meet human and animal nutrition needs, among the higher margin business lines. Under strong management team guidance, this company has moved rapidly from its more cyclical chemical industry roots to an impressive nutrition and performance materials group with a very sharp focus on sustainability. DSM is also targeting leading positions in growing markets, including emerging markets such as China. Return on invested capital is improving; the balance sheet is solid; margins are continuing to grow; and cash flow is strong. These characteristics make DSM a more defensive holding in the portfolio. The solid operational and financial performance provides the company with the ability to invest heavily in R&D and stay at the forefront of innovation — DSM is involved in more than 80 partnerships with academic and other institutions.
IQVIA is a unique combination of a traditional contract research organization (CRO), which conducts outsourced clinical trials and a healthcare technology company. Formed in 2016 through the merger of the largest global provider of healthcare data and the world’s largest CRO, the combined company provides a variety of information, technology services and contract research services to healthcare companies. IQVIA is leveraging its unmatched data assets and analytical capabilities to create a differentiated, “next generation” CRO that can run quicker, more efficient and less costly trials. The opportunity is large given the pressure on pharmaceutical companies to improve R&D efficiency; more than 80 percent of trials are delayed and many fail. One of IQVIA’s key competitive advantages is its ability to use its data to address the challenge of patient recruitment, one of the most frequent causes of trial delays and failures. The superiority of IQVIA’s product versus other CROs is beginning to convert into accelerated revenue growth and share gain. Alongside that IQVIA is also seeing strong demand for other software services it provides for healthcare companies that help improve outcomes and efficiency, such as the exciting area of “Real World Evidence,” which provides real-time evidence of the efficacy of drugs in the market. In an industry that is, relatively speaking, still rather inefficient with regards to data, IQVIA’s unique business model puts it in a strong position to disrupt healthcare markets through the use of technology.
Holdings are subject to change.
This information is not a recommendation to buy or sell any security.