Three stocks for long-term growth
Three stocks that should achieve long-term growth from structural shifts in demand, as picked by Paul Niven, manager of the F&C Investment Trust
The F&C Investment Trust aims to deliver long-term growth in capital and income for shareholders. It is a FTSE 100 constituent and is the oldest and one of the largest investment firm in the UK, with assets that exceed £7 billion. It invests in listed equities and private equity and has delivered 55 consecutive years of rising dividends. The trust is globally diversified and conservatively managed.
I have managed the firm since mid-2014, working with specialist stock-pickers from Columbia Threadneedle Investments and elsewhere in the market. This gives the trust exposure to different geographies, investment styles and sectors, including firms benefiting from long-term changes in what we spend money on, how we pay and use technology. The following holdings illustrate these themes.
Diverse stocks for long-term growth
Mastercard (NYSE: MA) is at the heart of the long-term move from cash towards card and digital payments. It earns fees on transaction volumes and values without taking credit risk, enabling an asset-light business model and exceptional capital returns. Its scale provides a significant competitive advantage. Consumers want cards that are widely accepted, while retailers want to accept the cards their customers already use, making Mastercard's network difficult for new competitors to replicate. Beyond the ongoing shift away from cash transactions in developed markets, there are opportunities for growth in emerging markets too. Mastercard is also expanding its value-added services, including cybersecurity, data analytics and open-banking services, providing further opportunities for growth.
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Infineon Technologies (Frankfurt: IFX) is a leading supplier of the technology underpinning three significant long-term trends: electrification, energy efficiency and AI infrastructure. It has a strong competitive position built over many decades. Sophisticated power management is at the heart of many of the transitions currently underway, including the shift to electric vehicles, renewable energy and modernising the grid, and Infineon is the global leader in power semiconductors, which are essential in this area.
The rapid growth of AI is creating another significant source of demand. The data centres needed to train and run increasingly sophisticated AI models require huge amounts of computing power and electricity, making efficient power management increasingly important. This represents a significant new growth market for Infineon that barely existed a few years ago. While its shares have been volatile, we believe the current valuation does not fully reflect the potential.
Live Nation Entertainment (NYSE: LYV) is the world's largest live entertainment company and has grown revenues by 15% per year on average since the pandemic. The company is benefiting from a structural shift in consumer spending towards experiences over goods, with demand for live experiences, such as concerts, increasing as a result. The combination of ticketing through Ticketmaster, concert promotion through Live Nation and venue ownership and management gives the business a strong position across the live entertainment industry. Consumers can buy their tickets, see their favourite artist and attend a venue all within the same platform. This vertically integrated model creates a powerful competitive advantage, allowing Live Nation to benefit at several different points as demand for live entertainment grows.
The three businesses above operate in very different industries, but each has built a robust competitive position in an area benefiting from a long-term shift in demand. For investors, identifying companies capable of turning these structural changes into sustainable long-term growth can provide opportunities that extend well beyond the short-term market cycle.
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