Cadence Design (US)

Cadence is the leading provider of electronic design automation (EDA) tools that are used for designing semiconductor chips and electronic systems. In the age of “connected everything,” this company provides some of the key architectural building blocks for the era of the Internet of Things.

  • Cadence’s semiconductor design tools let enterprises combine connected systems with machinery, which contribute to improved energy efficiency through reducing required inputs and increased productivity. Autonomous vehicles, home automation, 5G connectivity, factory and buildings energy management, data security, logistics and navigation, and smart cities all rely on increasingly complex systems, at the heart of which lie integrated circuits on semiconductor chips.
  • Chip design tool companies operate stable business models with high barriers to entry due to the necessary high research and development (R&D) costs, which are enabled by substantial free cash flow.1 With a unique business model that is agnostic in terms of individual software or hardware, Cadence designs whole electronics systems or individual chips, as well as increasingly small and complex integrated circuits, including those interacting with sensors.
  • A loyal customer base plus mission-critical technology for systems across the entire electronics design chain make Cadence an attractive US information technology company.

Lonza (Switzerland)

Founded 112 years ago, Lonza has made an impressive transformation from a chemicals company to the world’s largest outsourced drug manufacturer (CDMO) with a market-leading position in biologics. With the broadest offering and longest track record, Lonza offers pureplay exposure to the structural shift from small to large molecule drugs.

  • Lonza is the only CDMO with a full service offering along the whole value chain, from drug development to commercial manufacturing, for all large- and small-molecule modalities.
  • The company is ahead of the curve in building capacity for next-generation technologies such as cell and gene therapy. All of this reinforces high barriers to entry created by the required technological expertise, regulatory complexity and capital intensity of drug manufacturing, especially biologics, which are much more difficult to manufacture.
  • Lonza benefits from increasing outsourcing of drug manufacturing by large pharma alongside the emergence of biotechs that have little or no manufacturing expertise. Lonza’s top line is characterized by high visibility and the company is expected to deliver strong growth over the long term, supported by increased organic growth investments and favorable market growth dynamics.
  • With the sale of the company’s lower margin specialty ingredients business in 2021, the company has completed its transformation to a pure life sciences company.

HDFC Bank (India)

HDFC Bank began operations in 1995 with the mission to become a world-class Indian bank. It is well on its path to achieving this goal as the highest quality private sector bank in India — poised to capture the opportunity of relatively low penetration and adoption of credit and bank accounts in India, with structural growth from the young and increasing population with rising incomes.

  • HDFC has a best-in-class deposit franchise resulting in a lower cost of funds than peers. This allows the bank to focus on retail lending, where it can earn attractive margins despite lower lending rates as compared to the commercial (yet riskier) lending sector. As a result, HDFC has a strong balance sheet and a low level of non-performing loans than peers.
  • The bank continues to take market share from competitors and is investing heavily in technology with a careful eye on costs. On the wholesale banking side, HDFC has a competitive cash management product with significant market share.
  • A strong management team, consistent execution, rising fee income, good asset quality, and a strong capital base make this a compelling and high-quality investment in the emerging markets financials sector. A strong balance sheet and an expectation of a return to growth as economic activity in India normalizes, as well as attractive return on invested capital, make HDFC a compelling investment opportunity.

Pax Global Opportunities Fund Top 10 Holdings

(As of 10/31/2022)
Holdings are subject to change.

This information is not a recommendation to buy or sell any security.

1Cashflow is the movement of money in and out of a company. Cash received represents inflows, while money spent represents outflows. The cash flow statement is a financial statement that reports on a company’s sources and usage of cash over a specified time period.

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