At Charles Stanley we seek out top-quality British growth stocks: highly profitable companies with consistent earnings growth. Over the long term, these businesses should be able to reinvest their earnings and cement dominant market positions.
Such companies do come with a valuation premium, but time has shown that these premiums are justified, maintained and often grow in line with the businesses themselves.
We do allow ourselves scope to invest in shares that we consider to be misunderstood and therefore mispriced, or in assets that we deem highly specialist or unique. This ensures our portfolio isn’t entirely dominated by one factor.
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We have not reaped the full benefit of the “reflation/cyclical rally” triggered by the vaccine announcements last November, but take comfort in our performance through the pandemic correction and over the longer term. Committing to your strategy is crucial in investing and we did not want to flip the portfolio to chase the value factor through the early stages of this year.
We are fortunate to have a broad mandate within the Charles Stanley Equity fund, which allows us to look for attractive companies with different market capitalisations.
Cashing in on e-commerce
Boku (Aim: BOKU) is a relatively new addition to our portfolio; it offers online mobile-payment services. Many readers may not have come across the company, given the prevalence of banking and credit and debit-card transactions in the UK. Boku has spent recent years building up an impressive, market-leading payment platform that allows users to pay for goods through their mobile phones.
It has invested heavily in its network and is now poised to capitalise on its expenditure. Profitability and sales look set to rise, with the latter underpinned by the spread of digital wallets. Boku is a promising play on e-commerce and digital payment systems.
A successful transition
Auto Trader Group (LSE: AUTO) has long been a favourite of ours. This is a rare example of a print magazine making the transition to the digital world while vastly broadening its horizons.
The platform it offers both retail buyers and forecourt sellers is excellent and it boasts attractive opportunities for expansion. Auto Trader Group is not a cheap stock, but the margins are fantastic and the firm has consolidated its market position through the concessions it offered clients during the pandemic.
Revamped and ready to deliver
Occasionally, we see an already excellent business seeking to reposition itself for the future. This is not always straightforward. LSE Group (LSE: LSEG) seems to be in this category at present and investors are waiting for the new strategy to pay off.
LSE Group has dominated the market-infrastructure and capital-markets arena for many years. Its acquisition of financial market-data provider Refinitiv shows that it has thoroughly embraced a data and analytics-driven future.
The transition has come with teething problems. However, LSE Group now has all the necessary components to become a financial-market infrastructure and data provider, which bodes well for the company’s long-term prospects.
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