Majedie Investments appointed Marylebone Partners as its manager in January 2023 to invest in compelling long-term opportunities across highly differentiated, liquid-return sources. These comprise external managers, global equities and special investments regularly marked to market. Marylebone seeks returns exceeding inflation by at least 4% in the medium term.
Now that 13 years of ultra-low interest rates and quantitative easing are a distant memory, the manager believes that many previously successful investment strategies may struggle to deliver attractive real returns. Following the recent narrow focus on artificial intelligence (AI)-related mega-cap stocks, Marylebone sees some attractive valuations for quality compounders and companies undergoing change that are unappreciated by markets. These form a major part of the portfolio.
Many technology-related sectors have been overshadowed by the performance of mega-caps and now provide attractive entry points, while within the mid-cap universe, many stocks that have been shunned are attractively valued with good growth prospects.
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
Look beyond AI stocks
The IT industry is rapidly expanding, with increasingly integrated systems driven by the growth of cloud, cybersecurity and AI-related investments. Cancom (Frankfurt: COK) is well-positioned to benefit from this trend as a technology-agnostic company. It plays a crucial role as a partner for small and medium-sized enterprises (SMEs) by helping them with sourcing, building and managing technology infrastructure. This comes when mid-sized companies are expected to increase their IT investment expenditure.
The company is highly cash-generative, with a relatively low capital expenditure run rate. Its working capital position continues to improve following Covid-related supply-chain disruption. After a period of turbulence caused by high turnover in senior management, the leadership team is stable.
A similar case can be made for Computacenter (LSE: CCC), which is a value-added reseller of technology and IT infrastructure. It also serves as a consultant and IT services provider, with its primary markets being the UK and Germany. It acts as a single point of contact for public-sector companies and other enterprises to engage with technology providers such as Apple and Microsoft.
Computacenter leverages its size and long-standing relationships to negotiate better prices for customers. Moreover, it provides consultancy support for technology and infrastructure expansion needs. Long-term relationships are built and maintained by acting as a one-stop shop in providing ongoing IT management support. The company generates a free cash conversion rate of close to 100%, and earnings have compounded at an annual 17% since 2005.
Basic-Fit (Amsterdam: BFIT) is a low-cost operator of over 1,500 gyms across six countries in Europe. It was established by former tennis professional René Moos with a view to making fitness accessible to “everyone, everywhere”. Moos continues to lead the company and is its largest shareholder. Basic-Fit can offer affordable, high-quality membership thanks to its “no frills” development and operating model. This model is well established in its mature markets of the Netherlands and other Benelux countries. If Moos and his team can deliver on their return on capital and growth targets in less mature markets, notably France, there could be significant upside for shareholders.
This article was first published in MoneyWeek's magazine. Enjoy exclusive early access to news, opinion and analysis from our team of financial experts with a MoneyWeek subscription.
-
Buffett’s "insurance guru" Ajit Jain sells upWarren Buffett has long sung the praises of Ajit Jain, who he once tipped to take over in the top job. Now he is selling a big chunk of his stake in Buffett’s firm. Why?
-
What is the Budget and when is it announced?Labour will deliver its first Budget in over 14 years next month and Keir Starmer has warned it will be “painful”. For those too embarrassed to ask: what is the Budget and what time is it announced?
-
Are matchboxes worth collecting?TikTok is reigniting a spark for matchbox collecting. Is there any value in phillumeny or will it fizzle out?
-
Intermediate options trading strategies: how to profit from themOptions trading strategies such as spreads, straddles and strangles can open new opportunities
-
Investing in IPOs: a good idea or a risky affair?IPOs are far more likely to underperform the market than deliver spectacular gains. Here's why investors shouldn't get excited
-
Higher rates hamper Reits – are they still worth buying?Shares in Reits have been under pressure and, as a result, discounts to net asset value are likely to persist for some time – focus on income over value
-
Are shares disconnecting from reality?What effect is passive investing having on shares, and are ETFs going the same way?
-
The peak of the AI frenzy has passedWhen did the AI frenzy peak and what does it mean for tech companies?
-
The battle against heart disease and how to invest in itHeart disease is soaring due to rising obesity and an ageing population. But new drugs, treatments and diagnostic tools are on the way.
-
Woodside Energy: an undervalued energy playWoodside Energy offers a cheap way to invest in the growth of the global LNG market. Should you invest?
