Most companies are, by definition, mediocre. Some are good. Fewer still are great. And a tiny minority are truly exceptional. These are the ones I want to own. I’m looking to invest in durable, adaptable and – above all – resilient businesses; those selling critical goods and services, with high levels of recurring income from loyal customers. I believe the three companies below pass these tests with flying colours.
Experian (LSE: EXPN) owns the world’s largest credit bureau. It aggregates credit data from lenders, then sells it back to them. Without this data, banks would not be able to lend and the world economy would grind to a halt. Experian has successfully expanded into new applications, using its data in more ways to solve more problems for more customers in more industries.
Today, it helps over 180 million consumers take control of their finances. It assists over 150,000 businesses, not only with lending decisions, but in verifying online purchases, combatting fraud, acquiring customers and becoming more efficient. It even helps US hospitals manage payments.
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This evolution has been reinforced by significant investments in innovation, from its insurance marketplace allowing US consumers to search and apply for car insurance with a few clicks, to its major investments in analytics tools and software. The roll-out of these recently launched products has only just begun. And it could meaningfully accelerate Experian’s revenue and profit growth over the next decade. I’ve never been so excited by its long-term prospects.
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Danaher Corporation: a top "picks and shovels" play
In the California gold rush, it wasn’t the gold miners who made the most money. It was the companies supplying the picks and shovels. Danaher Corporation (NYSE: DHR) has positioned itself as the picks-and-shovels provider to the medical-science industry.
The company provides diagnostic tests, life-sciences instruments and technologies for the development, manufacture and delivery of biological drugs. The diversity of its product portfolio, leadership positions in highly regulated markets and global scale add up to a resilient business that is difficult to compete with.
That said, it hasn’t been plain sailing in recent years. The pandemic saw a boom in spending from pharmaceutical and biotechnology companies. When that trend reversed and these companies cut back on inventories, Danaher’s revenue and profit took a hit. The good news is that demand for biological therapies is still growing rapidly. And with most of Danaher’s customers having worked through excess inventories and returned to normal ordering patterns, the stage could be set for a return to growth.
I highlighted Roper Technologies (Nasdaq: ROP) as one of my favourite shares last year for MoneyWeek. I have chosen to do so again because I believe the firm is at an interesting juncture. Roper owns 28 high-quality software and technology businesses, generating excellent margins and cash flow, and has a strong record of acquisitions and disposals.
But 2024 wasn’t a vintage year. Tough market conditions for a few of its business subsidiaries held back organic growth. Those headwinds now appear to be easing and beneath the surface it is making excellent strides. Having disposed of its more cyclical businesses, Roper is now attempting to get the most out of its existing operations. This includes a sharper focus on strategy, talent and new product development, such as incorporating generative AI into its software solutions.
Roper’s acquisition strategy is also evolving. There is a greater focus on “bolt-on” deals that can be assimilated into existing firms, and buying businesses at a slightly earlier stage of their development, with stronger growth prospects. In short, I think Roper’s mid- to long-term growth prospects are improving. This could be the year that progress becomes more evident.
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