Halma. HLMA. Buy @ 2290p
Games Workshop. GAW. Buy @ 9325p
Liontrust Asset Management. LIO. Buy @ 1280p
Ashtead Group. AHT. Buy @ 5658p
Halma is a sensational business, maybe the greatest growth company the UK has ever seen. These shares have been rocketing since the 1970s when the company was founded by a business genius called David Barber. I met him several times and he was a phenomenon. The current CEO, Andrew Williams took over in 2005 and he is a massive talent too.
As you can see from the chart buy signals are rare so not to be missed. IF you want some never sell stocks in your portfolio this could be one. The company specialises in areas like the environment and safety and grows both organically and by a constant stream of small acquisitions of businesses which are already doing well. It is like a way for a small business to gain a public quotation and have the backing of a larger business which can take over all the head office operations.
Recessions are double edged swords for a business like this because the trading environment may become tougher but that throws up acquisition opportunities. Under Williams the company has been embracing all things digital.
Below is a description of how Halma operates. I love this business.
Our organisational model gives our companies the resources, agility and authority to respond to changes in their markets and the global operating environment, led by their local management team. It also has inherent scalability, allowing us to use M&A to expand our opportunities for growth, without adding further complexity to our structures and decision making or to divest when growth opportunities become more limited. As we have grown, we have deliberately developed a more collaborative culture. This has allowed our companies to address opportunities and solve common issues together, benefiting from the Group’s increasing scale, while still retaining the advantages of being small, agile companies, close to their markets. This has been crucial during the COVID pandemic and will continue to be so as we address the further opportunities and challenges ahead.
Annual report 2022
Games Workshop looks to boost royalty income
Games Workshop, especially led by Kevin Rountree, who has been CEO since January 2015, is another sensational business. It makes me so happy that at last I can again start recommending shares in these wonderful companies. Again buy signals are rare so not to be missed.
I guess subscribers will be familiar with the core miniatures business. They make a wonderful hobby, especially for boys who, according to one female analyst I spoke to about the company, have not discovered girls yet. Lots of buys seem to have their cake and eat it though judging by the age of many GW enthusiasts.
Three things have driven the growth push of recent years. First is a CEO ready to spend money to make money which means a proper management structure and new factory capacity. The miniatures are mostly made in England, around Nottingham, so similar to the luxury goods approach which has made LVMH, Hermes and others such successful businesses.
Games Workshop sells through its own stores, through independent stores and online. It is that middle bit where sales have exploded. GW says they don’t control it but it has grown like topsy as independents have invested both in stocking GW products and selling them online. It has also benefit from a top tier of management dedicated to driving growth
The third area of success has been royalty income. Tom Kirby, the CEO before Rountree, was suspicious of royalties and wary of tarnishing the brand. It has been a different story with Rountree who has set up a dedicated team and driven dramatic growth in a business which is nearly all profit. A recent initiative is a tie up with Amazon.
We have agreed, in principle, to explore opportunities to exploit our IP with Amazon Studios. We announced this in December 2022 after the half year period. We have nothing more to say at this stage. We will keep you informed. We remain confident we will bring the worlds of Warhammer to the screen like you have never seen before.
Results for 26 weeks to 27 November, 10 January 2023
There is no need to go mad on analysis, just trust these guys to do their job with passion and dedication.
Another rewarding and successful period for the global team with core sales for the six months of over £200m for the first time. We will continue to focus on making the best miniatures in the world, sign new licensing contracts with partners to exploit our IP outside of our core business and support our staff.
Results for 26 weeks to 27 November, 10 January 2023
Liontrust grows AUM nearly 30-fold in 12 years
As you can see Liontrust went through a difficult period until a new management team arrived led by Adrian Collins who reinvented the business model after the group nearly collapsed in 2009-2010. Since then it has been a great success story with funds under management growing from £1.3bn for 2010-11 to £33.5bn for the year ending November 2022. These guys have an approach that works and they are going to continue with it.
The teams have generally made few changes to the companies they are invested in because of their belief in their long-term business models and the concomitant competitive advantages that support them. They have identified opportunities to add to existing holdings at cheaper valuations and in some cases invest in companies that were previously considered too expensive.
Annual report, 21 June 2022.
Fund managers inevitably take a hit from falling stock markets but in the longer term they create opportunities.
“The challenges of the past year have created further opportunities for financially robust asset managers with strong distribution and brands. The quality of Liontrust’s fund management processes and teams, client service, sales and marketing gives me great confidence that we can take advantage of these opportunities.”
Trading update, 18 January 2023
Ashtead rides a global shift from owning to renting
Ashtead is another wonderful business and equipment rental is a wonderful growth sector in which to be such a dominant player. It is all part of a global trend to outsourcing and the customer base has expanded dramatically beyond its origins in the construction industry. Investors can be nervous with equipment rental because their balance sheets can look scary, equipment funded by borrowings but Ashtead is battle hardened and knows exactly how to manage the risks. As an active predator in the sector this helps by making it easier to find acquisitions. The two giants in the sector still only have 28pc so there is plenty of room to grow, especially since Ashtead is having great success cannibalising its own outlets. The original store may lose some rentals but the two together grow market share and become an even more threatening presence for smaller incumbents.
Again we are seeing a rare opportunity to buy the shares into a buy signal.
Strategy
Warren Buffett talks about bear markets as presenting opportunities to buy shares in great companies at sale prices. It goes against the grain with me to just buy into weakness. I like to see signs of a change of direction and we have that now. I believe this is a great moment to buy the four shares featured above.
