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A fund manager trouncing 90% of his rivals shared with us 5 trades he's making to stay ahead — including a big bet on Disney after it was crushed in the pandemic sell-off

david dudding
  • David Dudding's mutual fund has consistently brought in bigger returns than the vast majority of peers over the past few years, and it's one of the best global stock funds in 2020. 
  • Dudding told Business Insider that his fund has succeeded lately because of bets on tech and healthcare.
  • He also detailed the major themes in his portfolio, what he's done since the pandemic started, and his top picks for the future.
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David Dudding didn't make a New Years' Resolution to beat 90% of the market every year, but he's doing it like clockwork anyway.
At his global stock fund — the Columbia Threadneedle Select Global Equity Fund — he's pulled off that feat each of the last three years through up and down markets. He's on track to do it again in 2020, which has been one of the wildest years in stock market history.
He's run the fund for five years, and in that time, Kiplinger says only nine funds in the category have brought in better annual returns. What he's looking for is pretty simple: A strong balance sheet, minimal earnings volatility, and a big edge over the competition.
"What you have to have is an improving moat or set of competitive advantages," he told Business Insider in an exclusive interview. "So we have a bias towards quality and growth stocks."
He adds that major positions in tech companies like Microsoft and Adobe and healthcare companies like Novo Nordisk and Thermo Fisher have bolstered his returns. The fund doesn't have many giant gainers over the last year, but it has very few losers among its 42 positions.
Combined with a lot of gains in the range of 20% and 30%, that adds up. The Select fund returned 7.8% over the 12 months that ended March 31 while the benchmark MSCI World Index lost 10% and the typical global large-cap fund fell about 8%.
Dudding isn't making dramatic changes, but he says it's time to start looking through the market's wreckage for new ideas. Here's what he's done so far, and the current picks he's most confident in over the next few years.

Added: Disney

Dudding brought stock in Disney during one of the hardest periods in its history with parks and movie theaters closed and ESPN running low on sports to televise. But even if the recovery takes a long time, he thinks it's coming.
"We still think that the Disney franchise is pretty brilliant," he said. "Things aren't going to get magically better for them for them overnight, but we like wat they're doing with Disney Plus, and the brand value hopefully, is unimpaired and as strong, if not stronger, going forward."

Sold: Pernod Ricard

Around the same time, he closed a position in Pernod Ricard, the maker of Jameson whiskey, Absolut vodka, and Martell cognac. Dudding says he still likes the company, but the pandemic is hurting a key chunk of his investment thesis, as the closure of bars and restaurants is hurting Pernod's cognac sales in China.
"They're trading down across spirits, so that's not a good trend for them," he said. "We just took the view that there were probably better opportunities across the world that had sold off more."

Top idea 1: Nvidia

"We're very overweight technology, predominantly software, but also semiconductors," Dudding said. Nvidia became a market favorite in the 2010s, bringing in a gain of about 1,200% over the last five years.
The general thesis is that chip makers will prosper because so many kinds of businesses will put semiconductors into new products. That trend could benefit a lot of companies, and Dudding also thinks the growing interest in artificial intelligence will benefit Nvidia.

Top idea 2: HDFC Bank

As noted, there aren't many losers in the Select portfolio, but HDFC Bank has been its worst performer with a loss of 20% over the last year. Still, Dudding was willing to call India's largest bank a top pick because "the rise of Asia" is a major theme in his portfolio.
"It doesn't look as though we're overweight Asia, but ... a lot of our stocks have more of an Asian exposure then than it appears," he said. "We own a life insurance company in Asia, for example, we own some Indian banks."

Top idea 3: Kone

Kone, one of the world's largest elevator manufacturers, is another example of Dudding's approach to investing in growth in Asia even though the company is based in Finland.
"The company benefits from building up in emerging markets, but most importantly makes its money from long-term service contracts," he said. "Kone has a rock solid balance sheet, attractive dividend yield, and might still be able to play a part in industry consolidation."
SEE ALSO: Award-winning fund manager Randall Dishmon says the way to win at investing is to think like a Warren Buffett-style acquirer. Here are the 3 questions he always asks before buying a stock.
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