Sorry!! The article you are trying to read is not available now.
Thank you very much;
you're only a step away from
downloading your reports.

The Benefits of Growth Investing


Getting solid, above-average growth over the long term is a painstaking process, but it's well worth the effort.

It is a selective process though, I will tell you. In our history, for example, we only have on our buy list 60 to 70 companies today, and we have 25 to 30 in the portfolio.

There aren't a lot of companies out there that have those characteristics, but we do find them in a number of different sectors. The exception being certain sectors that are either heavily regulated, like the utilities sector, or sectors where there is no pricing power, like telecom services, where those companies unfortunately face continued decline in pricing power.

Gregg Early: I guess there's also a silent sixth criterion, which is that to make it into the fund the companies have to do at least 50% of their business outside of US shores, right?

George Fraise: Well, it is a byproduct of the process. It is not an arbitrary rule. What we find is that the portfolio today generates more than 50% of its profits from outside of the US.

What we find actually in terms of revenues, for example-which we believe is a very important way of looking at the makeup of the portfolio-37% of the revenues are generated in the US. That's a significant portion that's generated outside of the US.

Gregg Early: Do you have any specific companies that would be good examples of your process?

George Fraise: Sure. One of the companies that we've had a good longstanding investment in is Yum Brands (NYSE:YUM). This one is a US-based company, but what we like about Yum...and by the way, Yum is the company that has a number of restaurant franchises like KFC, Pizza Hut, Taco Bell...

Gregg Early: Yes, American icons.

George Fraise: It is an American icon. One of the things that is interesting is that today it's much more than just an American icon. Yum derives 50% of its profits from China and 60% of its profit from emerging markets in general. The economics are just wonderful.

In China, for example, they have 4,500 restaurants right now -- McDonald's (NYSE:MCD) only has 1,500, by the way. It costs on average about $550,000 to open a KFC in China. The first year of sales are $1.25 million and cash margins are 25%, so it's a wonderful business model and one where they have the long runway of growth because we think that they can probably get to 10,000 or 15,000 units in the future, which gives them the ability to grow for a long period of time.

No positions in stocks mentioned.
The information on this website solely reflects the analysis of or opinion about the performance of securities and financial markets by the writers whose articles appear on the site. The views expressed by the writers are not necessarily the views of Minyanville Media, Inc. or members of its management. Nothing contained on the website is intended to constitute a recommendation or advice addressed to an individual investor or category of investors to purchase, sell or hold any security, or to take any action with respect to the prospective movement of the securities markets or to solicit the purchase or sale of any security. Any investment decisions must be made by the reader either individually or in consultation with his or her investment professional. Minyanville writers and staff may trade or hold positions in securities that are discussed in articles appearing on the website. Writers of articles are required to disclose whether they have a position in any stock or fund discussed in an article, but are not permitted to disclose the size or direction of the position. Nothing on this website is intended to solicit business of any kind for a writer's business or fund. Minyanville management and staff as well as contributing writers will not respond to emails or other communications requesting investment advice.

Copyright 2011 Minyanville Media, Inc. All Rights Reserved.
Featured Videos