Each week, a professional investor tells us where he’d put his money. This week: Steve Weeple, Henderson Global Growth Fund.
We search for companies that have built competitively advantaged franchises, and which operate in end markets that look set to benefit from long-term (or secular) societal growth trends. These trends include the transformational impact of the internet on traditional retailers; the need for innovation in healthcare as we live longer; and the steady rise in living standards across the emerging markets. All of these ongoing societal shifts offer investment opportunities that are not reliant on a perfect macroeconomic backdrop.
We look for established and profitable business models with proven management teams, that we believe have many years of growth ahead of them. We want to see evidence that there is a track record of alignment with shareholders, and we aim to invest at a price that we believe will offer a very attractive long-term return.
Icon (Nasdaq: ICLR) is one such company. It helps pharmaceutical and biotech companies launch new drugs by managing the clinical trial process on their behalf. The complexity of running clinical trials has increased markedly in the last 20 years, with regulators requiring more data and longer treatment periods to prove the safety and efficacy of drugs. The resulting increase in costs has encouraged the outsourcing of this work to specialised organisations. But so far, less than 50% of the potential market has actually been addressed. Of that, the top five firms only account for 40% of the outsourcing activity, so this trend has room to continue for many years.
Tiger Brands (JSE: TBS) is a South African consumer staples company with a track record dating back almost 100 years. The company produces a wide variety of consumer goods, ranging from the iconic Black Cat peanut bar (launched in 1926, it has now evolved into a high-energy power and protein bar), Ingram’s line-up of affordable skin-care creams, the Purity range of baby formula and infant nutrition, to the All Gold pasta sauces business. Strong brands, high market share, exposure to growing populations, and rising living standards across sub-Saharan Africa combine to make this a very attractive franchise.
MercadoLibre (Nasdaq: MELI) has grown to become the largest e-commerce company in Latin America. Beyond its core online marketplace it offers payment services through Pago (similar to PayPal), shipping services and advertising. This exposes the firm to two long-term secular growth trends: the online disruption of retail and the growth of the electronic payments business.
The Latin American e-commerce market is at an earlier stage of penetration compared with more developed markets, with only around 3% of shopping conducted online versus a global average of around 6% and almost 15% in the UK. The scale and entrenched position that MercadoLibre has built creates formidable barriers to entry in a market where we often see the leader dominate through the network effect.