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High-powered chart breakouts – shares, ETFs and investment trusts

November 18, 2020

Alphabet GOOGL $1770 MV: $1198bn Next figures: 3 February 2021

Alphabet is one of the iconic stocks of the 21st century. I use Google Search I don’t know how many times every day and that ubiquitous usage has created the backbone of an endlessly growing and highly profitable online advertising business. Add to that the extraordinary success of YouTube, one of the greatest acquisitions of all time and it is no surprise that the group is valued at almost $1.2 trillion dollars. The growth keeps coming. Q3 2020 saw an improvement in ad spend across all geographies and strength in Google Cloud, Play and YouTube subscriptions. The sheer scale of the group’s operations is creating regulatory issues but also makes it possible for the group to invest and fund r&d on a gargantuan scale. Alphabet/ Google is one of those shares which you never need to sell. Ten years from now who knows what new exciting things the business will be doing. Waymo, for example, is making great progress in autonomous driving.

 

ASML Holdings ASML $419 MV: $173bn Next figures: 20 January 2021

Semiconductors stand at the heart of the technology revolution, which means that many stocks that play an important role in the sector have been great performers. ASML has special expertise in lithography, a process whereby highly complex circuit patterns drawn on a photomask made of a large glass plate are reduced using ultra-high performance lenses and exposed onto a silicon substrate known as a wafer. The group has used this expertise over the last 30 years to build a sizeable business well placed in a strongly growing industry. By 2025 it is estimated that some 160 trillion gigabytes of data will be created annually. This can only hap- pen because of improving performance and lower costs for computer chips leading ASML to anticipate exponential industry growth over coming years. Group sales for 2019 were Euro11.8bn. The group expects this to grow to between Euro15bn and Euro24bn by 2025.

 

Bitcoin $15,984 All-time high: $20,000 approx.

I regard bitcoin and other cryptocurrencies as pure speculations. They are impossible to value so could be worthless or worth a fortune. They are traded 24 hours a day, seven days a week, which means there is always somebody buying and selling making them a paradise for gamblers of whom, as we know, there are many in the world. You could almost see bitcoin as a sump for the world’s liquidity making them attractive at a time of zero to negative interest rates and central banks and governments trying to stimulate demand. The chart looks amazing. The moving averages are rising and we have a chart breakout from a potentially huge pattern.

 

Estee Lauder EL $253 MV: $92bn Next figures: 5 February 2021

In a world of Zoom and selfies it is not surprising that great make-up is even more important, which is driving strong demand for beauty products. Estee Lauder describes itself as a leader in global prestige beauty, a dynamic, vibrant industry benefiting from favourable demographic trends. It operates in around 150 countries, owns over 25 prestige brands and has total net sales of $14.3bn. Companies like Estee Lauder generate substantial sales from global tourism and foot traffic in stores, which has been hard hit by widespread lockdowns but even despite this Q3 2020 sales, reported on 2 November, were only down nine per cent. The group expects multiple growth engines to deliver sequentially improving sales growth in each quarter in fiscal 2021.

 

Futu Holdings FUTU $40.5 MV: $2.68bn Next figures: 19 November

Futu Holdings describes itself as an advanced technology company transforming the investing experience by offering a fully digitised brokerage and wealth management programme. The company is pursuing a massive opportunity to facili- tate a once-in-a-generation shift in the wealth manage- ment industry and build a digital gateway into broader financial services by primarily serving the emerging afflu- ent Chinese population. The company is due to report Q3 2020 results imminently and described its Q2 results as “continuing to achieve exponential growth across our operating and financial metrics, following a very successful first quarter. The group grew its number of clients by 84pc year on year to reach 303,102 and within that the number of Hong Kong paying clients jumper 125pc. This has been helped by a shift in emphasis of Chinese businesses away from Nasdaq and towards IPOs and listings on the Hong Kong stock exchange. The group expects to grow clients in 2020 by 141pc.

 

Guardant Health GH $106 MV: $11.6bn Next figures: 16 March 2021

Guardant Health describes itself as “a leading precision oncology company focused on helping conquer cancer through our proprietary blood tests, vast data sets and advanced analytics. Liquid biopsy is at the core of our mission to conquer cancer with data”. The group recently reported Q3 results show- ing revenue up 23pc year on year to $74.6m. It also noted that it had received FDA approval for Guardant 360 CDx, becoming the first liquid biopsy test for comprehensive tumor mutation profiling across all solid can- cers. Group performance was impacted by Covid-19 but the group says “With the FDA approval of Guardant360 CDx behind us and as we look forward to 2021 they are more confident than ever in the opportunity to transform patient care across the cancer care continuum.

 

Impax Environmental Markets IEM 412p MV: £1.06bn Next figures: 20 April

Impax Environmental Markets is an investment trust which invests globally in the resource efficiency and environmental markets. The idea is that these markets address long term themes like growing populations, rising living standards, increasing urbanisation, rising consumption and depletion of limited natural resources. Investments are made in pure- play small and mid cap companies which have over 50pc of their underlying revenue generated by sales or environmental products or services in the energy efficiency, renewable energy, water, waste and sustain- able food and agriculture markets. I have heard of two of the top 10 investments American Water Works, which has featured in CB in the past and was under consideration for this issue and Littelfuse which makes circuit protection and sensing products for a ‘safer, greener and increasingly connected’ world. All 10 holdings are clearly ‘green’ businesses. Over the last five years the net asset value per share has increased by 116pc while the shares are up 156pc.

 

Insulet Corp. PODD $251 MV; $16.9b Next figures: 1 March 2

Insulet Corporation is a Massachusetts based company which has developed what it calls the revolutionary Omnipod Insulin Management System to expand the use of insulin pump therapy. There are many advantages to insulin pump therapy over daily insulin injections but many people still choose the latter because of the complexity, cost and inconvenience of conventional pump technology. Advantages of Omnipod include discreet ease of use, lack of tubing, virtually pain-free insertion and wireless communication. Q3 earnings, reported on 4 November, showed revenue growth of 20pc and with new customer starts stronger than expected the group now expects to deliver its fifth consecutive year of 20pc revenue growth despite the pandemic and says it is addressing an enormous and growing market.

 

KeyenceCorp. 6861 Yen 51,710 (£381) MV: Yen 12541bn (£92.5bn) Next figures: 29 January 2021

I am surprised that I had not previously heard of Keyence Corp., which is one of the top five companies in Japan by market value. The company says it has grown steadily since 1974 to become an innovative leader in the development and manufacturing of industrial automation and inspection equipment worldwide.Prod- ucts include code readers, laser markers, machine vision systems, measuring systems, microscopes, sensors and static eliminators. The group serves over 250,000 customers in 110 countries and has been consistently ranked among the world’s most innovative companies in rankings such as those prepared by the US Forbes business magazine. Sales are over $5bn and the group has delivered more than 20pc annual growth over the last 10 years. I struggled to find the latest performance information but the long term record is amazing and increasing automation is a powerful long term trend.

 

L’Oreal OR Euro314 MV: Euro176bn Next figures: 11 February 2021

Rather like Estee Lauder, French giant, L’Oreal, describes itself as the global leader in beauty. I am obviously not as well informed as I should be on the subject of global beauty because of the nine brands listed under consumer products I have only heard of two, L’Oreal Paris and Garnier. Under L’Oreal Luxe I have heard of more including Kiehl’s since 1851, where I actually have some of the products. Next is professional products led by L’Oreal Professionnel and finally active cosmetics, where I have heard of nothing but no doubt among women they are household names. What is obvious is that selling a French idea of beauty to the world is a spectacular business and L’Oreal is hugely successful. Latest results for sales to 30 September 2020 showing the business returning to growth (+1.6pc) after a period of weakness driven by lock- downs. Standout performances were sales up 15.2pc in active cosmetics, up 61.6pc in e-commerce to 23.7pc of total sales and up 20.8pc in mainland China, where many businesses are seeing strong growth as an increasingly prosperous and numerous middle class is emerging as the world’s most exciting consumer market.

 

LVMH LVMH Euro471 MV: Euro236bn Next figures: 26 January 2021

LVMH is the global luxury goods powerhouse created by former investment banker, Bernard Arnault, who has gone from banking to famous by the film, Breakfast at Tiffany’s. What is apparent from the chart and the performance of the business is the strength of global demand for luxury goods driven by global tourism (luxury goods are bought on mass in airports and also streets like Bond Street, which are magnets for for- eign visitors). The other big driver is the emergence of China as an increasingly important factor in consumption. Thanks to decades of communist austerity traditional luxury brands ceased to exist in China making them avid consumers of European brands. At the heart of LVMH is Louis Vuitton, which rivals Hermes and Chanel as the world’s greatest single luxury brand. In the first nine months of 2020 group sales fell 21pc but with a sharp improvement in the latest quarter and every expectation of strong growth ahead.

 

Maxcyte MXCT 430p MV: £299m Next figures: 28 April 2021

Under the heading, Maxcyte in one minute, the group describes itself as a US based global company driving the acceleration of the discovery/ development, manufacturing and commercialisation of next generation, cell-based medicines. As the inventor of the premier cell-engieering enabling technology the company helps bring promise of next generation cell and gene editing therapies to life. It claims 20 of the top 25 and all top 10 pharmas as clients. Other plus points are 90 gross margins and a five year record of 25pc compound annual growth with a high proportion of recurring revenue providing on-going financial visibility. Under way is the first in-human trial for ovarian cancer and peritoneal mesothelioma with preliminary clinical results expected in the second half of 2020. Latest inter- im results showed revenue growth of 30pc and three new clini- cal/ commercial licenses signed in 2020 with leading cell therapy developers. The CARMA Cell Therapies subsidiary is expected to be self-funded by the end of 2020.

 

Mettler-Toledo MTD $1168 MV: $28.1bn Next figures: 11 February

Mettler-Toledo, as can be seen from the chart, is a machine for turning business performance into sustained high shareholder returns. Only interrupted by severe downturns in the overall stock markets the shares have climbed relentlessly since the 1998 IPO and it seems likely that in the not too distant future they will have risen 100- fold from their opening price back then. The group has something in common with a UK business called Halma, which nearly featured in this issue and which has also delivered sustained high returns to shareholders by focusing on market leading positions in niche business areas. MTD makes precision instruments for use in laboratory, industrial and food retailing operations. One of its best known products is a range of pipettes. Market leadership and a global sales and service operation creates strong relationships with its customers and since many of its products are short lived it generates strong recurring income. It uses its high free cash flow to buy back shares, creating another powerful driver for steadily rising earnings per share. Latest results showed earnings rising 22pc.

 

Morningstar MORN $202 MV: $8.8bn Next fig- US$ ures: 20 February 2021

Morningstar provides data to help investors take more informed decisions. This has been a buoyant business in recent years as evidenced by strong growth in group sales which have risen from $555m in 2010 to $1190m for 2020. An increasingly important factor driving investment flows has been the emphasis on ESG investing. ESG stands for environmental, social and corporate governance with investors increasingly concerned that the businesses in which they invest should be good citizens. The group talks about three secular trends in investing – ESG, demand for increased value for advice and the expansion of alternative asset classes into the mainstream. Morningstar has prospered by catering for all these trends and also notes that there is increasing evidence that investors can build a global portfolio of companies that have positive ESG attributes without compromising returns. Latest revenue increased 13.8pc to $357m , while adjusted net earnings per share rose 46.2pc.

 

Pinduoduo PDD Latest: $141 MV: $127bn Next figures: 17 March 2021

“Pinduoduo turned five last month reaching another milestone on this incredible journey. For the year ended 30 September 2020 the group reached 731m active buyers and generated nearly RMB1.5 trillion {$227bn} GMV [gross merchandise value]… Our mobile platform has become a mainstream shopping app. Most importantly Pinduoduo has become China’s largest online platform for agricultural products by enabling direct selling from farms to the dining table. We are prepared to invest capital and resources in our platform, supply chain and ecosystem to realise our vision. We realised we were only at the beginning of our journey to create new value in China’s agricultural supply chain.”

 

Repligen RGEN $195 MV: $10.8bn Next fig- ures: 18 February 2021

Repligen describes its mission as improving lives through innovation in bioprocessing. Some idea of the momentum in the business is that in 2019 revenue grew 39pc, 15pc of total revenue came from new class of biologics – cell and gene therapies and full diluted earnings per share rose 62pc. Sales have almost doubled since 2017. The strong performance continues. Q3 2020 saw sales up 25pc and further strong growth in earnings. The group is also growing by acquisition and expects Covid programmes to account for approximately 10pc of total revenue.

 

RH RH $402 MV: $8bn Next figures: 2 December

“The emergence of RH as a luxury brand generating luxury margins has arrived years sooner than expected and we now believe we will reach 20pc adjusted operating margin in fiscal 2020 with mid single digit revenue growth. If revenues grow at a higher rate in the second half, we would expect adjusted operating mar- gins to expand beyond 20pc, and now see a long term path to 25pc adjusted operating margins.” RH is an upmarket, super aspirational furniture business, which sells from galleries led by Gary Fried- man, a CEO as flamboyant as his furniture. Demand growth has been accelerating to reach 44pc in September.

 

UnitedHealth Group UNH $351 MV: $337bn Next fig- ures: 19 January 2021

I sometimes think of UnitedHealth Group, a US provider of healthcare insurance as like a bigger and arguably better version of the NHS. Among their initiatives “Our growing therapeutics are positively impacting the management of chronic diseases with the introduction of Level2, a digital therapy developed to improve the lives of Type2 diabetics of whom there are 30m in the US.” The group is leveraging data and artificial intelligence to intercept and treat disease earlier leading to better outcomes for patients. The group’s efforts are leading to world class NPS, net promoter scores, in the 70s and driving strong growth in sales and earnings.

 

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