Large Cap Investing During Volatile Markets

TRANSCRIPT

Ankur spoke about digital transformation, the need to digitize your business in order to effectively compete and be relevant within your respective industries. It is table stakes. We're seeing that, for example, in the retail sector, where you need to digitize your business in order to effectively compete longer term and to remain in business. JP Morgan are spending over $11 billion on technology and Jamie Dimon called it table stakes for their business. I think we're still in early days in this digital transformation trend. I think CEOs across sectors recognize they need to digitally transform themselves. This entails investing more into technology in order to do that. And as Ankur mentioned, I think the current situation is only accelerating those trends. That is what is so interesting about what is currently happening and all the innovation that we're seeing. The pace of innovation has been accelerating. And now you add on the current situation and that just further accelerates things. So, again, we try and highlight this innovation theme because we think there's just so much innovation occurring within the markets and it's going to continue to create winners and losers across sectors. Patrick Kelly : We think there's a tremendous amount of innovation occurring within the health care sector as well, with all the advances in drug development and genome sequencing and all the advances in the med tech sector with how surgeries are performed now. Now you get a knee or a hip done and it's quite different than it was ten years ago or 15 years ago. A lot of these surgeries and are now being done robotically or minimally invasive surgeries. In terms of holdings, one of our largest holdings within health care is Danaher, which has gone through a bit of a life cycle change. They've divested two of their more cyclical, lower growth businesses and they recently just closed the acquisition of the GE biopharma business, which was the crown jewel asset at GE. And GE was forced to sell that asset, given their financial situation. Speaker Question : I wanted to ask your thoughts on the health care sector, obviously, a sector that's been impacted by this significantly.

We think Danaher was able to acquire that asset at a very attractive multiple and we think this is a very attractive business, where they just have a dominant position that can grow high single digits for the next 5– 10 years in kind of a normalized environment. And the business mix has shifted to a much more recurring mix, with more consumables. We think that's just a really well positioned company over the next 5–10 years and we think that's a company with very good, durable growth prospects. Ankur? Ankur Crawford : I would say that health care has been deemed to be a relatively defensive sector, given the characteristics of these business models. In a downturn, historically, health care has outperformed. Now what we're seeing in this go around, because of the nature of what is going on, there are some businesses that have not exhibited that characteristic but in health care are offering incredibly compelling risk reward. If we look at, again, the concept of the good getting lumped in with the bad, just a couple of weeks ago there was a large company that we own in our health care portfolio. It got down to 15 or 16 multiple for a business that is going to have durable growth for a long time. And yes, there are headwinds right now because, you know, they're not able to do elective surgeries and all of those are getting pushed but as we come out of this, that growth is still there because they have 40%, 50%, 60% share in each of the markets that they have. Patrick Kelly : I think some of these companies will benefit from this longer term, as there's just going to be a much bigger focus on a health care spend and finding solutions for situations such as this. I think it's very likely the government will be investing much more in health care and so looking at some companies that that will benefit from that longer term. Speaker Question : I wanted to have your insight and your view on the semiconductor markets. A lot of companies had a lot of inventory before the crisis and how the coronavirus impacts them and do either of you have a view for the next quarter?