Every week, a professional investor tells MoneyWeek where she’d put her money now. This week: Marina Bond, investment manager, Rathbone Smaller Companies Fund.
Markets have had a good run since the correction earlier this year. The Alternative Investment Market (Aim) in particular has regained some lost ground. Opportunities remain, both in some new issues and in existing stocks which have been rather forgotten about. One crucial point when picking stocks is a strong management team: all companies, and the market for that matter, are made up of people. Finding an individual or team that has delivered in the past tends to pay off.
Discover Leisure (DISL) is the UK’s top caravan retailer, having just bought its largest rival, Barons. The management, who are ex-Lookers and ex-Dixon Motors, joined up last year to consolidate this fragmented market. Caravanning is not too dissimilar to the motor industry, and certainly less mature, so the group sees opportunities for rationalisation, improved margins and expansion. That this is a growth market is shown by the popularity of the Caravan Club, which has more than 900,000 members. Growth comes mainly from the over-50s, for whom caravanning is a lifestyle choice. Most customers, having downsized their homes, are cash buyers, making the company more resilient to rising interest rates. Discover Leisure is asset-backed – its retail sites are valued on an existing-use basis at just over £12m. It is also extremely cash-generative with good growth potential.
Inland (INL) is a brownfield property developer, run by the management of the highly successful Country & Metropolitan. The firm specialises in buying sites prior to planning approval, ironing out problems with the planning process, and then selling the land to housebuilders. Government policy is generally supportive of recycling brownfield land, and this is unlikely to change. Net asset value on float was about 41p, but this has risen due to an acquisition and recent planning approval at one of their sites. Inland also has a meaningful stake in local housebuilder Howarth Homes, with the crossover benefits this entails. The group floated at 50p in April and hasn’t performed with the market, but I believe this is a management team to back.
Dyson (DYS) – the materials technology firm, not the vacuum cleaner group – is another management story. Its ‘Ecoflex’ catalytic-converter parts provide one of the best solutions to the problem of protecting automotive catalytic converters from extreme temperatures, thermal shock and road vibration. In its latest update, Dyson said it was producing record levels of components in April. But that’s not all: it also has the technology to improve the data-storage capability of hard disk drives. The product will soon reach final testing with a potential multi-national customer base.
The stocks Marina Bond likes
Stock, 12mth high, 12mth low, Now
Discover Leisure, 38.5p, 10.5p, 26.8p
Inland, 64p, 48p, 49p
Dyson, 314.9p, 173p, 309p
Medicsight, 142p, 118p, 140p