Each week, a professional investor tells MoneyWeek where he'd put his money now. This week: Michael Savage, partner at, Killik Capital.
We seek to pick good, undervalued, UK small- to mid-cap companies. Here are three that we like.
Titan Europe (LSE: TSW) is an international engineering group designing, developing, manufacturing and distributing products and services for original equipment manufacturers (OEMs) such as Caterpillar and John Deere.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
It focuses on global construction (around 50% of revenue), mining (20%) and agricultural machinery (30%). The outlook has been improving dramatically in recent months, confirmed by upbeat commentary from the equipment manufacturers themselves.
Titan designs and manufactures wheels (44%) and undercarriage components and assemblies (56%) for tracked and wheeled off-road vehicles. The high debt figure (about £150m) is an issue, but the firm's main banks (Intesa SanPaolo/UniCredit) appear supportive, and credit facilities were successfully renegotiated in May 2009. There is also considerable net asset value support of 172p per share. There are two large corporate shareholders on the register: a privately owned German peer, Mefro Wheels (29.9%), and also the US-listed Titan International. The latter made an all paper bid in the spring of 2008. It already holds 17% of Titan Europe and if, as proposed, it buys Goodyear's agricultural tyres business in Europe then a bid for Titan Europe's wheels business (if not the whole thing) looks sensible.
Our next tip, Landkom (LSE: LKI), is a Ukrainian-based producer of soft commodities, including rape seed, wheat, barley, maize and soyabean, with a growing land bank. Given its location, which boasts abundant agricultural land and large amounts of labour, the business has the potential to execute low-cost farming, and compete with other farming regions. Investors who knew the Landkom business two years ago may be wary. However, the issues that caused the share price to fall from more than 100p per share to the recent lows of just 2p the poorly timed purchase of farm equipment and fertiliser at the peak of the commodity boom in 2008 and a heavy reliance on one crop, winter wheat have been corrected.
The British management team has also largely been replaced, with CEO Vitaliy Skotsyk now in control. The interims for 20 July reassured with a sharp fall (over 35%) in operating costs per hectare.
Meanwhile, crop prices, and particularly those of wheat (up 50% since the end of June), have spiked dramatically. The group is on target to break even on a cash-flow basis this year. We think there is even scope for a surprise to the upside.
Our final pick, Nestor Healthcare (LSE: NSR) provides a range of staffing and managed services to both health and social care markets in the UK. Around 70% of revenue comes from social care and the remaining 30% from primary care. Social care encompasses non-medical services offered to care for the ill, elderly or disabled in their homes. The aim is to allow them to live free of institutionalisation where possible. The primary-care division is mainly involved in providing out-of-hours services say if a medical emergency occurs outside of normal GP hours. 90%+ of revenue comes from local authorities and the NHS. However, the risks linked to spending cuts are slim, given the comparatively high cost to the government of pulling these contracts. Furthermore , the main growth driver an ageing UK population is not about to go away.
-
Can you afford to retire in 2025?From interest rates and inflation to tax changes, there are plenty of factors to consider if you plan to retire next year – here is how to prepare.
-
8 of the best properties for sale near ski slopesThe best properties for sale near ski slopes – from a luxury cabin in Geilo, one of Norway’s premier ski resorts, to a large chalet in Valais, Switzerland
-
Somero: trading this overlooked bargainFeatures Mechanical-screed maker Somero dominates its niche and is attractively valued. Matthew Partridge picks the best way to trade it.
-
How to find big profits in small companiesCover Story The small- and micro-cap sectors are risky and volatile. But with careful research and patience, investors could make huge gains. Matthew Partridge explains how to find the market’s top tiddlers.
-
The hidden gems on Aim, London's junior marketFeatures Aim, London’s junior market, is risky – but you can find solid stocks at low prices. Scott Longley reports.
-
Is Aim finally coming of age?Features The Aim market of mostly smaller companies has traditionally been seen as a bit of a backwater. Is it time to change that view? Matthew Partridge talks to Paul Latham and Richard Power of fund management company Octopus.
-
Three Aim-listed firms that will thrive in a post-Brexit worldOpinion Matt Tonge and Victoria Stevens of the Liontrust UK Smaller Companies Fund pick three Aim-listed firms that will survive Brexit turmoil.
-
Fetch! The Chinese small-cap stocks to buy in the Year of the Dog
Opinion Each week, a professional investor tells us where she’d put her money. This week: Tiffany Hsiao of Matthews Asia selects three Chinese small-cap stocks with exciting potential.
-
Small and mid-cap stocks with big potential
Opinion Professional investor Guy Anderson of the Mercantile Investment Trust selects three small and medium-sized firms with promising prospects that the market has missed.
-
Get cheap, reliable growth from smaller companiesFeatures One of the most reliable long-term investment trends is the long-term outperformance of smaller companies over blue chips. Max King picks some of the best ways to buy into this growth.
