Quick Take: To gain entry to the Pax World Growth Fund (PXWGX) companies must first pass a number of social and environmental screens.
Those that make it over the first set of hurdles then have to show portfolio manager Paul Gulden that they can increase earnings and sales by 20% or more per year, and sustain that growth rate. Where finances are concerned, Gulden also looks for low debt and strong cash flow. He likes to buy stocks at prices he deems reasonable.
Lately, Gulden has found attractive investments among energy and related stocks. Even if currently high oil prices pull back to the mid-to-low $30s, drillers and explorers “should be able to make a heck of a lot of money,” he says.
Gulden’s $63-million fund gained 12.1% through October this year, topping all of its all-cap growth fund peers, which rose 0.7%. For the three-year period ended in October, the Pax World fund returned 7%, versus a gain of 3.7% for its peers. The portfolio was recently upgraded to 4 Stars from 3 Stars by Standard & Poor’s.
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The Pax World Growth Fund can’t buy companies that pollute or otherwise hurt the environment, so finding energy stocks can be difficult, says portfolio manager Paul Gulden.
Still, he’s found enough acceptable stocks in the sector that they account for about 10% of the fund’s holdings. Gulden has been drawn to these businesses lately because they stand to benefit from high oil prices.
One energy-related stock that successfully passed through the fund’s environmental screens is Chicago Bridge & Iron N.V. (CBI), which Gulden began buying within the last couple of months. The company, according to Gulden, is the leading designer and builder of terminals that store and process liquefied natural gas, a fuel that he says is becoming increasingly popular.
Chicago Bridge’s growth rate has been “somewhat spotty,” Gulden concedes. But he believes it will “accelerate quite dramatically” as more energy producers become interested in liquefied natural gas. The company should also get a boost from some large contracts it signed not long ago, Gulden says.
Elsewhere in the energy sector, the fund has stakes in Smith Intl (SII) and Baker Hughes Inc (BHI), which provide products and services to oil and natural gas companies; Apache Corp (APA), which drills for oil and natural gas; and Chesapeake Energy (CHK), a natural gas producer.
In addition, Gulden owns shares of Carbo Ceramics (CRR), which makes ceramic beads that are pumped into fractures in rock to make oil and natural gas flow more freely, thus increasing the productivity of wells.