The TM Cerno Global Leaders fund invests in a diverse array of global businesses that the managers believe will occupy leadership positions in their sectors for the next ten years or more.
The portfolio has very little overlap with other quality equity strategies. Below is a selection of three quite different businesses that we believe are poised for growth as we emerge from the pandemic next year.
Nervous systems for cars
Despite many articles suggesting that there is a growing reluctance to own motor vehicles (particularly among the younger generation), the car is not dead. Aptiv (NYSE: APTV) focuses on revolutionising the architecture of vehicles.
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Architecture in this context is conceived as the “brain and nervous system” required to enable autonomous driving. The electrical power consumption of cars has risen sixtyfold since 1995, while signal distribution speeds (in essence, how rapidly power and data move through the vehicle) have risen by a factor of 20. Yet today’s vehicle data, signal and power distribution systems rely on decades-old technology.
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Self-driving vehicles of the future need to have the networking capability to move vast amounts of data from the vehicle’s “eyes and ears” (sensors) to the “brain” (computing platform) for analysis and decision making. Aptiv has expertise in both key domains, from connectors and distribution systems to advanced software for passenger safety. The company is the leading provider of such “nervous systems” with a 25% share of the overall market.
PPG Industries (NYSE: PPG) is one of the world’s largest coatings companies and the only truly global supplier. Its diversified product portfolio touches a broad swathe of the economy, from specialised, high-performance industrial applications, to consumer architectural paints.
Much of the portfolio involves selling to business customers, which means that quality, consistency and timeliness of service are critical. This in turn limits the potential for disruption from budding competitors.
As the world shifts from internal combustion engines to electric vehicles, the coatings developed by PPG will be integral to the proper functioning of battery packs, boosting the value of PPG’s content per vehicle by two to four times. PPG’s return on capital is more than twice that of its European peer, AkzoNobel.
Profit from a return to the pub
The pandemic has caused significant headwinds for Heineken’s (Amsterdam: HEIA) business, which revolves around social drinking.
Earnings forecasts have been revised down by more than 50% since the start of the year, reflecting this lower demand. However, while some consumer behaviours have been altered by the pandemic, human beings are creatures of habit – we will all return to pubs and bars in time.
Despite its near-term travails, the company operates in a consolidated market, which is enjoying ever-increasing demand. Heineken’s scale in distribution is a key advantage, particularly in emerging markets, and its brand has by far the greatest global reach. While beer is an industry characterised by a vibrant start-up scene, most brands migrate towards one of the big brewers once a certain scale is reached.
