The high conviction 38 stock fund, managed by Ed Cowart and John Pandtle of Florida-based Eagle Asset Management, has seen three holdings subject to takeovers in the past four months – substantially more than the team’s average of two per year over the previous seven years.
The stocks subject to takeovers were oilfield machinery manufacturer Lufkin Industries, which was acquired by conglomerate GE – while pork giant Smithfield Foods was acquired by Chinese group Shuanghui. REIT Colonial Properties Trust also merged with Mid-America Apartment Communities.
This activity helped power performance of the Nordea 1 – North American All Cap Fund, which has returned 30.3% over the past year to end August, against 19.6% for its Russell 3000 benchmark.
Despite the recent rise for the fund and the overall US equity market, Cowart and Pandtle believe the valuation parameters today are similar to the fund’s May 2012 launch.
As for the health of the US economy, the managers expect the Federal Reserve to keep stimulus in place for some time.
“Fed chairman Ben Bernanke created quite a stir when he began talking about an eventual ending of the Fed’s bond-buying program. Our view is quite simple – the Fed will not end its easing program until a self-sustaining economic recovery is unambiguously in place,” Cowart says.
“In the aftermath of a financial crisis such as the one experienced in 2008 – 2009, a period of slower growth naturally ensues. Admittedly, with better macroeconomic policies in place, growth might have been a bit stronger but we have to play with the card the market environment deals us.
“But we do see an abundance of investment opportunities created by the intersection of slow overall economic growth, low inflation and interest rates, and a thriving corporate sector.”