Three small companies with big potential
Nish Patel, portfolio manager of The Global Smaller Companies Trust, picks three small companies where he'd put his money

The Global Smaller Companies Trust seeks to offer investors exposure to small businesses both in the developed markets and faster-growing emerging markets. The trust takes a long-term, conservative approach to investing in good-quality, growing businesses when they become available at a significant discount to intrinsic value.
This disciplined investment process focuses on capital preservation and long-term value creation rather than chasing short-term market trends. We have found exciting opportunities in companies likely to benefit from increased spending on construction, both in the public and private sectors.
Three small companies to invest in
Martin Marietta Materials (NYSE: MLM) is a US-based producer of construction materials, such as aggregates, cement and ready-mix concrete. As the business sells products that have a low cost-to-weight ratio, it effectively operates a series of local monopolies. Materials from the company’s quarries are rarely transported more than 50 miles owing to high transportation costs. The business has a history of raising prices for customers, even in difficult times.
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The company’s infrastructure division is likely to see significant demand from the $1.2 trillion Infrastructure Investment and Jobs Act (IIJA) that was passed in 2021. Spending on manufacturing and data-centre facilities and a recovery in construction of single-family homes are also longer-term drivers of organic revenue and profit growth for Martin Marietta. The company benefits from a strong balance sheet and prudent capital allocation, which provides resilience in more challenging market conditions.
Breedon Group (LSE: BREE) in the UK is a similar business. It has exposure to Britain and Ireland and recently entered the US through an acquisition. Construction activity in the UK and Ireland has not yet recovered to levels last seen in the early 2000s, and therein lies the opportunity. From a supply perspective, permitting for new assets is very challenging and this keeps industry capacity tight, reinforcing the company’s ability to raise prices.
Management has a history of creating shareholder value from acquisitions, through implementing the industry’s best practices at the operations of acquired businesses. The company is likely to make further purchases of smaller competitors. There is ample scope for further purchases, especially in the US. Share ownership by insiders is high, aligning management with shareholders.
Canada’s WSP Global (Toronto: WSP) offers engineering services in the areas of transportation, infrastructure, environment, property and power. The company has grown its market share organically by offering a full suite of services to its customers, making it a “one-stop shop”.
WSP’s global footprint and strong relationships with clients also help it to secure repeat business and large-scale contracts, adding to the predictability of its revenue streams. The business has natural drivers behind it in the form of an aged infrastructure base that needs updating, urbanisation, climate change and water scarcity. It supplements this growth through opportunistic acquisitions that bring additional capabilities to the business.
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Portfolio manager of The Global Smaller Companies Trust
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