Harding Loevner International Equity
Around the globe pick: Europe
Fresenius Medical Care runs dialysis centers, providing an indispensable service to patients whose kidneys are failing. With an aging population, that market is burgeoning: Researchers expect the number of Americans with end-stage renal disease to reach 785,000 in 2020. That's up 60% from 2005 levels. Fresenius, which is based in Germany but operates primarily in the U.S., commands some 30% of the market, according to Alec Walsh, co-head of the $2.2 billion Harding Loevner International Equity Fund (. )
Fresenius's edge: It can leverage its size to tamp costs down, he says, making it more profitable than tinier rivals. Since 2007 the company has boosted its net profit margin by more than 20%.
Fresenius recently reported earnings that lagged analysts' projections, nicking its shares. But Walsh, whose fund has returned 9.1% a year over the past decade, sees that as an opportunity. He blames one-time operational issues. And analysts expect 11% annual earnings increases for the next five years. One promising target: emerging markets. Walsh notes that the number of dialysis patients in Asia is increasing by 10% a year.
Beware of munis priced at bubble levels. They'll always pop in the end.
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