A professional investor tells us where he'd put his money. This week: Simon Gergel, manager of The Merchants Trust, highlights three recent purchases.
Our investment approach is to seek out high-yielding stocks that we believe can deliver a high income and an attractive total return. We consider three key aspects of a company.
First, the fundamental strengths, notably the structure of the industry it operates in, the group's competitive position, balance sheet and cash generation, and also environmental, social and governance factors.
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Second, we gauge the valuation of the shares compared with history and other companies in the market.
Finally, we assess long-term structural trends affecting the industry as well as shorter-term cyclical threats and opportunities. Ultimately, we are seeking sound businesses that are attractively valued and poised to benefit from cyclical or structural trends.
Here are three we bought in the last financial year:
Cashing in on mass affluence
St. James's Place (LSE: STJ)
St. James's Place has been able to grow both the number and the productivity of its advisers effectively over the longer term. The firm benefits from a number of structural trends, such as a growing affluent population and increasing need for financial advice with a shift out of final-salary pension schemes among younger workers.
Strong foundations for growth
Keller (LSE: KLR)
In order to increase urban density and replace infrastructure, today's developers have to dig deeper and more complex foundations, and deal with increasingly challenging ground conditions. The valuation of the shares was very depressed last year, partly owing to a number of operational difficulties, but also because of its UK stockmarket listing. With less than 5% of sales in the UK, we thought the business was wrongly categorised as a UK construction business, resulting in an unreasonably low valuation.
New markets for a tobacco giant
Simon has been the Chief Investment Officer of UK Equities at Allianz Global Investors for more than 17 years and he has extensive experience in fund management. Previous to that, Simon was the Director Senior Fund Manager at HSBC for four years and a UK fund manager executivedirector at UBS Global Asset Management for 14 years. He has a degree in mathematics from the University of Cambridge. Simon contributes to MoneyWeek, giving his outlook on the stockmarket in MoneyWeek’s share tips.
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