March - CI Investments

Spotlight onStephen JenkinsMasterCard WorldwideMasterCard Worldwide is a global business that is benefitingfrom the trend of moving away from paper-based transactionsto electronic-based transactions for payments betweenthe banks of merchants and purchasers. This has largelyhappened in the U.S., where 40%-45% of all transactions arenow done electronically. The opportunity for MasterCardis in emerging economies and other nations where thepenetration is still very low. Unlike buying a bank with a largecredit card operation, MasterCard has no credit exposure andno default risk. It’s a toll bridge operator that takes a small feefrom every transaction. When we first bought the stock a yearago at around US$165, we felt strongly that it could grow salesby 12%-15% a year and there was an opportunity to cut costs.We felt that it would increase margins and the bottom linecould grow at close to 20% annually over a five-year period.There was very little expectation built into the stock whenwe bought it under 14X expected earnings. Now the stock istrading closer to US$250 and the multiple has expanded toabout 17X. We think it should be closer to 20X. The businesscontinues to grow at more than 15% annually and we thinkthere’s more to come. It’s a very solid global company, withgreat long-term growth prospects.CVS CaremarkCVS Caremark is a leading drugstore chain with over 7,000retail pharmacies in 40 U.S. states. Caremark, anotherdivision, is a pharmacy benefit manger. The two companiesmerged in 2007 and there was uncertainly about the benefitsthat would accrue from the merger. There still is some doubtbecause is hasn’t delivered on all the benefits that I think aregoing to come down the road. We bought the stock around10X earnings for company that we think will growth at 12%-15% a year over the next three to five years. CVS is a consistentbusiness that is going to be benefit from the changes in U.S.health care, such as more individuals having access and moregeneric drugs coming down the pipeline. The stock is doingwell and the multiple has expanded a bit. It’s a prominentholding and one of the top 10 in the portfolio.Mastercard Worldwide325300275CVS Caremark4540250225200175150125US$35302510020Mar 08May 08Jul 08Sep 08Nov 08Jan 09Mar 09May 09Mar 08May 08Jul 08Sep 08Nov 08Jan 09Mar 09May 09Jul 09Sep 09Nov 09Jan 10Mar 10US$Jul 09Sep 09Nov 09Jan 10Mar 10Source: BloombergSource: BloombergPAGE 23 • SPRING 2010 PERSPECTIVE AS AT MARCH 31, 2010