Expert Insights: Six Stocks Poised for Significant Growth
Leading investment managers, overseeing portfolios valued in the billions, have identified six companies they believe are significantly undervalued and hold substantial potential for future growth. These seasoned professionals, with decades of experience in identifying long-term winners, are continuously scouting for opportunities, whether in disruptive startups or established businesses making strides in crucial sectors like healthcare, energy, and artificial intelligence. Some of these picks represent solid companies that have temporarily fallen out of favour with the market.
Eli Lilly (US)
Stephen Yiu, manager of the £3 billion Blue Whale Growth fund, backed by billionaire Peter Hargreaves, is particularly enthusiastic about US pharmaceuticals giant Eli Lilly. Despite a brief dip in 2022, the fund, under Yiu’s guidance, has achieved an impressive 19.2 per cent annual return, significantly outperforming its global peers’ average of 9.6 per cent. Yiu favors large companies with a clear long-term growth trajectory, with previous notable holdings including tech giants Nvidia and Broadcom. He champions an ‘invest in what’s capturing spending’ approach, noting Eli Lilly’s appeal to consumers, enterprises, and governments. The company’s successful weight-loss drug Mounjaro, and its oral pill version, Foundayo, are seen as significant revenue drivers, with a vast global market potential. Yiu highlights Eli Lilly’s innovative edge and strong manufacturing capabilities as key competitive advantages. The company’s shares have risen over 41 per cent in the past year, with a dividend yield of 0.63 per cent. UK investors can purchase shares via investment platforms, requiring a W-8BEN form to confirm non-US taxpayer status.
Lion Finance Group (UK)
Jacob de Tusch-Lec, who has managed the Artemis Global Income fund for 16 years, has an exceptional track record, delivering nearly 800 per cent returns for his investors, compared to 350 per cent for its peers. De Tusch-Lec employs a contrarian strategy, focusing on companies that generate substantial cash flow, which is then returned to shareholders via dividends. His top pick among the £6.4 billion fund’s 90 holdings is the UK-listed Lion Finance Group. De Tusch-Lec has held this financial services company since 2012, initially seeing its share price stagnate before its strong growth phase in the last four years. He anticipates continued robust growth for Lion Finance, primarily driven by its stake in Bank of Georgia, which he likens to the ‘Singapore of the Caucasus.’ While acknowledging potential volatility and political risks associated with Georgia’s location, he points to its EU-standard banking regulations and a growing economy. The acquisition of Ameriabank in Armenia is expected to further boost earnings. Lion Finance’s recent promotion to the FTSE 100 is anticipated to drive demand for its shares, particularly from index-tracking funds. Despite a 69 per cent share price increase over the past year, the company’s strong earnings and a 2.5 per cent dividend yield make it an attractive proposition. Its market ticker is BGEO.
Frasers Group
Alex Wright, manager of the Fidelity Special Situations and Fidelity Special Values funds for 12 and 13 years respectively, has generated strong returns for investors. His approach often involves seeking opportunities below the FTSE 100 index. Frasers Group, majority-owned by Mike Ashley and trading on the FTSE 250, is a current favorite. Known for Sports Direct, the group also owns brands like House of Fraser, Evans Cycles, Flannels, and USC. Wright emphasizes Frasers Group’s robust business model, which leverages its scale to acquire discounted stock from major suppliers like Nike and Adidas, boosting margins and profits. The company’s ownership of its retail sites, rather than leasing them, provides significant property backing. With substantial stakes in Hugo Boss, AO, Asos, and Mulberry, Wright believes the shares are attractively priced. While the share price has seen a modest 5.6 per cent increase over the past year, Wright anticipates a potential turnaround. The market ticker is FRAS.
RELX
Job Curtis, manager of the City of London Investment Trust for nearly 35 years, has a strong record of consistent dividend growth, with 59 consecutive years of increases. While typically investing in steady, income-friendly UK stocks, Curtis is optimistic about the prospects of RELX, a provider of analytics and decision tools for professional and business clients, including scientific, technical, and medical information. RELX’s shares have declined over 40 per cent year-on-year due to concerns about AI disruption. However, Curtis posits that RELX is well-positioned to benefit from AI, as it already integrates the technology across its risk, legal, exhibitions, and scientific, technical, and medical divisions. He notes that the company’s analytics, algorithms, and data are proprietary. Analysts forecast an average annual earnings per share growth of 12 per cent over the next four years, and the shares appear reasonably valued by historical standards. The company offers an attractive dividend yield of 2.8 per cent, with dividend payments showing growth. The market ticker is REL.
Bloom Energy
Mike Seidenberg, manager of the Allianz Technology Trust, which invests in leading global tech companies, is particularly excited about US energy company Bloom Energy. The trust has delivered strong returns, with one and five-year figures of 75 per cent and 164 per cent respectively. Bloom Energy, founded 25 years ago, specializes in solid oxide fuel cell systems for commercial, industrial, and data center clients. Seidenberg sees the company in a ‘very favorable’ position given the exponential growth in data centers driven by AI. He highlights Bloom Energy’s expertise in manufacturing environmentally friendly fuel cell systems that provide reliable, 24/7 power. The company’s shares have surged 257 per cent in the past six months. Seidenberg believes Bloom Energy is ideally positioned to capitalize on the demand for data centers powered by dependable energy. UK investors can purchase shares via investment platforms, subject to completing a W-8BEN form. While an exciting prospect, it carries inherent risks. The market ticker is BE.
Fevertree
Nick Train, who has managed the Finsbury Growth & Income fund for over 25 years, identifies premium drinks mixer brand Fevertree as a stock with significant potential. While the fund has experienced losses in recent years, Train remains a highly respected manager. He points to Fevertree’s pioneering role and continued dominance in the premium mixer market, noting that competitors, including large beverage companies, have failed to erode its market share. Train is particularly encouraged by Fevertree’s success in the US, especially its partnership with North American drinks giant Molson Coors, which provides access to an extensive distribution network in a market 12 times the size of the UK’s. A recent trading statement from Fevertree suggests the Molson Coors collaboration is yielding positive results, with new account wins. Despite a 10 per cent share price decline over the past year and a 69 per cent drop over five years, Train believes the Molson Coors partnership could be a catalyst for a strong recovery. The trust holds a 2.3 per cent position in Fevertree. The market ticker is FEVR.
