Gearing up with Applied Materials

  @FortuneMagazine November 21, 2013: 7:34 AM ET
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Anatomy of a trade

(Fortune)

James Hamel, 46, and Jason White, 40, part of the team that runs the $754 million Artisan Global Opportunities Fund, seek companies with competitive advantages, reasonable valuations, and profit cycles that are accelerating or about to do so. The approach has generated 19.9% annualized returns since the fund's launch in 2008, besting its benchmark by five percentage points per year. One pick the managers can't get enough of lately: Applied Materials.

1. It dominates key markets

The company's profits have been lackluster recently. But the Artisan duo say the industry is in flux, and Applied Materials, the leading supplier of fabrication tools and services to chipmakers, is positioned to cash in on the changes. The company has a broad product portfolio and maintains a dominant share in four processing segments: ion implantation, rapid thermal processing, physical vapor deposition, and chemical-mechanical planarization. It has streamlined its operations to reduce costs and has a "big library" of patents to shield its assets.

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