Top-quality small companies with big scope for long-term growth

A professional investor tells us where he’d put his money. This week: Dr Gareth Blades, analyst at Amati Global Investors, highlights three favourites.

veterinarian with dog
(Image credit: Getty Images)

The TB Amati UK Listed Smaller Companies fund provides comprehensive coverage of the UK Smaller Company and Aim universe. We apply our bottom-up, fundamentally driven stock-picking approach to the bottom 10% of the UK equity market by market capitalisation. We are UK smaller-company specialists and growth investors favouring top-quality, growing businesses with sustainable margins and revenues. 

While it has been a testing 12 months for smaller companies, we now find that there are many with strong growth drivers whose share prices have suffered from poor sentiment. We currently see an attractive decoupling between stock prices and company values.

Plenty of potential in pet care

CVS Group (Aim: CVSG) is an integrated veterinary-services provider. It caters for the trend towards the humanisation of pets, and owners’ willingness to pay for the best-quality care. Expanding pet-insurance coverage is another long-term growth driver for the group. CVS is highly integrated and can offer pet owners an end-to-end service. For example, surgery takes place in CVS referral units, diagnostic tests are processed in-house, and food and medication can be bought from the retail division. When pets die, they can be cremated in CVS facilities.

Subscribe to MoneyWeek

Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE

Get 6 issues 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

Sign up

The business is largely based in Britain, with some veterinary practices in the Netherlands. CVS has grown organically by investing in its own services and infrastructure to improve margins and capture customers’ propensity to spend. Acquiring veterinary practices at home and abroad should provide additional momentum in the years ahead. This strategy aims to double earnings by 2027.

Keeping tabs on your profits

Big Technologies (Aim: BIG) sells and services electronic ankle-tagging devices, principally for criminal justice systems around the world. The company leads a market worth an estimated £1.2bn. The CEO, Sara Murray, spent three years designing a wearable tag called Buddi before bringing it to market in 2005. The firm’s tags are smaller, more robust, more accurate, and easier to charge than competitors’ products.

The upshot has been strong contract growth. Big Technologies has continued to win new contracts and expand sales with existing customers. It achieved sales growth of 33% last year, a pace maintained into the current year. Visibility on sales is also excellent, as larger contracts in this sector are long-term. The company is now bidding for additional EU contracts, while significant cash reserves provide enough capital for investment in geographic expansion. 

Making money in medical devices

Creo Medical (Aim: CREO) is a medical-device company with expertise in advanced energy endoscopy and robotic surgery. These can be
considered the successors to keyhole surgery. Creo has developed a suite of advanced instruments (already approved by regulators) that can be used for minimally invasive surgery. 

Creo’s instruments enable surgery that is faster, more accurate and has better outcomes for patients. Creo is targeting a market worth more than $2bn for its surgical instruments – even before we consider the new domain of robotics, for which it has a partnership with the leading robotic-surgery company, Intuitive Medical.

Nicole García Mérida

Nic studied for a BA in journalism at Cardiff University, and has an MA in magazine journalism from City University. She joined MoneyWeek in 2019.