3 quality names from Stewart Investors

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Lewis Jackson: Hello, and welcome to Morningstar. Today, I'm joined by Pablo Berrutti from Gold-rated fund manager, Stewart Investors, to talk through three ideas he believes have long-term potential for investors.

Pablo, thanks for joining me.

Pablo Berrutti: Thanks, Lewis.

Jackson: Let's start with the first name then, Fisher & Paykel. What drew the fund's eye?

Berrutti: Well, primarily, it's around the quality of the business as being one of the leaders in ventilators, humidifiers, and sleep apnea machines. They provide devices that go into emergency rooms and intensive care all the way through to in-home care. The company has built its first humidifiers out of jam jars, and in the subsequent decades it's become a globally dominant name. During the COVID pandemic, there was a big spike in demand for their products, and they made the decision not to raise prices, even though they had increases in logistics and other costs, which just shows the quality of their business and their financial strength to be able to absorb that over that period. But now that those machines are deployed, over the long run, the consumables that those machines use will underpin their earnings and their growth for a long time into the future.

Jackson: Now, the second name is one that would be familiar to many investors, CSL. Why should investors take a second look?

Berrutti: CSL is perhaps one of the highest-quality companies in Australia. Certainly, in our view, it is in plasma supplies without question the best at what it does in the world. It has had a difficult period during COVID in collecting plasma, particularly in the U.S., because clearly people aren't able to then go and donate, but that will as the society opens up will become easier for them. They have a great vaccine business as well in the flu area which they turned around, which again shows the quality of the management team at CSL from a loss maker to a really good earner and contributor to the company. And so, as the underlying demand for plasma, which is really essential for so many types of life-saving procedures and medicines continues to grow, we think CSL has a bright future.

Jackson: Now, the third name Spirax-Sarco, may not be familiar to many investors. Talk us through the company and why you like it.

Berrutti: Sure. So, this one mixes it up a little bit. It's an industrial company. They're specialists in steam technology. And so, steam may sound very old – an old hat. But actually, the way that they operate their business and the types of services that they provide to their clients, which range in a range of sectors from food to resources, is to make them more efficient. And so, they're able to save their customers' carbon emissions, they're able to save their customers' energy and they're able to do that through the control and deployment of steam. Now, the company has had a very good run this year as the economies opened up. But if you imagine the thousands of gas-powered boilers all across Europe that need to be converted to electric to then produce steam for industrial purposes, Spirax-Sarco is perfectly positioned to help make that transition happen and reduce emissions across the whole of the European economy. So, we think that over the long run their best days still lie ahead.

Jackson: Okay. Fantastic. So, that's Fisher & Paykel, CSL and Spirax-Sarco.

Berrutti: Three good-quality companies.

Jackson: Thanks very much, Pablo.

Berrutti: Thanks, Lewis.

This report appeared on www.morningstar.com.au 2022 Morningstar Australasia Pty Limited

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