Leaving the herd allowed this fund to exploit rallies

A willingness to separate from the pack is key to successful global equity investing, according to David Fingold, manager of the Dynamic Discovery Fund Ticker:(DWGDX). “You can't beat your competitors by owning the same things they own,” he said. Mr. Fingold's tendency to blaze his own trail is illustrated in the way he loaded up on commercial-real-estate exposure at the stock market's low point in early 2009. And even though he rode the financial services sector rally between 2004 and 2007, he was completely out of it in early 2008 before the financial crisis hit. The all-cap global portfolio of just 24 stocks currently has no exposure to financial sector stocks, which is a stark contrast to the benchmark MSCI World Index, in which financial services is the largest weighting. Meanwhile, the fund has a 3.2% allocation to Austria, which is 10 times the weighting of the benchmark. Mr. Fingold, who manages a total of $2.5 billion, runs the fund from Toronto for Dynamic Funds, a $52 billion asset management firm. Dynamic Funds entered the U.S. market less than three years ago, but Mr. Fingold has been managing a Canadian version of the strategy since September 2004. The fund is value-oriented and focuses on healthy and growing companies. “We exclude any company with a bad balance sheet,” he said. “We get our performance by not owning the torpedoes.” While the fund has the flexibility to go anywhere, 10 of the 24 stocks in the portfolio are U.S.-based, including Globe Specialty Metals Inc. Ticker:(GSM), the largest U.S. position. In addition to being the world's lowest-cost producer of silicon metal and silicon-based alloys, the stock is a perfect example of what Mr. Fingold is looking for in an investment. “We like businesses that are able to perform near the trough levels,” he said. “Globe Specialty Metals is an example of that.” While he is currently paying attention to defensive stocks, which include “things you can eat, drink and smoke,” Mr. Fingold has a history of riding the cyclical waves. “We will sell cyclicals when the economy is strong, and we'll buy them when the economy is weak,” he said. Both the fund and the benchmark are down slightly from the start of the year, but last year, the fund gained 18.7%, which compares with a 12.3% gain by the index. Portfolio Manager Perspectives are regular interviews with some of the most respected and influential fund managers in the investment industry. For more information, please visit InvestmentNews.com/pmperspectives.