Together, they oversee investment portfolios running into billions of pounds, aiming to build our long-term wealth through shrewd stock selection. It is a responsibility they have carried for many years — in some cases, for decades — yet for these six investment managers, the search for opportunity never stops.
As the people behind some of Britain’s best-known investment funds and stock market-listed trusts, they are constantly scanning the horizon for fresh prospects that could develop into enduring winners.
Those opportunities might be young, fast-growing companies — often described as disruptors — bringing new thinking, technology or products to the market. They may also be established firms driving innovation in fields such as healthcare, energy and artificial intelligence.
Equally, the attraction could lie in dependable businesses that investors have temporarily overlooked or undervalued. At present, a sizeable number of UK companies fit that description.
With that backdrop, we asked six leading investment professionals to identify the holding outside their fund’s top ten that currently excites them most — both for its investment case and its potential to deliver outsized returns.
Their choices are wide-ranging and intriguing, offering plenty for investors to consider if they want to inject a little extra spark into their portfolios. One of them may — and I emphasise may — turn out to be a serious wealth-builder.
Eli Lilly (US)
Stephen Yiu, Blue Whale Growth
Supported by billionaire Peter Hargreaves, the Blue Whale Growth fund now manages £3 billion in assets — an impressive milestone for a fund that was launched less than nine years ago.
Despite a wobble in 2022, the fund under the stewardship of Stephen Yiu has delivered annual returns of 19.2 per cent. To put this into perspective, the average return from its global peer group is 9.6 per cent.
Yiu invests in large companies that are on a long-term growth path
Yiu invests in large companies that are on a long-term growth path, with top-ten holdings including US tech giants Nvidia and Broadcom. Of the fund’s 35 companies, the stock Yiu is most enthused about is US pharmaceuticals giant Eli Lilly.
‘As a stock picker, I embrace the “follow the money” investment approach,’ he says. ‘This means I invest in companies that are capturing spending from consumers, enterprises, and governments.
‘In Eli Lilly’s case, it is attracting money from both consumers and governments.’
The success of the company’s weight-loss drug Mounjaro is being continued with the pill version, Foundayo.
‘With some 20 per cent of the world’s population as potential customers, the new weight-loss pills should outsell the original injectables,’ he adds. ‘Eli Lilly has a competitive edge over its rivals as a result of its lead on innovation and the financial firepower to invest in manufacturing capacity.’
Over the past year its shares are up more than 41 per cent. Its dividend is equivalent to an annual yield of 0.63 per cent.
Yiu is convinced there’s more to come.
UK investors can buy shares in Eli Lilly via an investing platform. But as with any US share, you will have to complete a digital W-8BEN form confirming that you are not a US taxpayer.
Lion Finance Group (UK)
Jacob de Tusch-Lec, Artemis Global Income
Investment fund Artemis Global Income has been managed since launch 16 years ago by Jacob de Tusch-Lec.
Its investment record is impeccable, clocking up returns of nearly 800 per cent against 350 per cent for its global equity income peer group.
Tusch-Lec is a contrarian investor who invests in companies that generate lots of cash – money that drips down to shareholders and, in turn, fund investors by way of dividends.
Of the 90 holdings in the £6.4 billion fund, the one that gets his investment juices flowing the most is UK-listed Lion Finance Group. Tusch-Lec has held shares in the financial services company since 2012.
Tusch-Lec is a contrarian investor who invests in firms that generate lots of cash
‘The share price went sideways for a long time,’ he says. ‘But I continued to hold the shares because of the dividends the company paid and clear evidence that the foundations of a good business were being laid. It’s only in the past four years that it has gone into strong growth mode.’
His enthusiasm for the business remains undimmed. ‘There’s little reason to think the company won’t continue growing strongly for years to come,’ he says.
The principal growth engine behind Lion Finance is Bank of Georgia, a business that Tusch-Lec describes as the ‘Singapore of the Caucasus’. He adds: ‘Yes, the share price of Lion Finance can be volatile, and there’s political risk aplenty as a result of Georgia being sandwiched between Iran and Russia.
‘But the country’s banking regulations are on a par with those in the European Union and the economy is in growth mode.’
The company has expanded into Armenia through the purchase two years ago of Ameriabank, a move which Tusch-Lec says should drive further growth in the company’s earnings.
Lion Finance’s recent promotion to the FTSE 100 should result in strong demand for its shares, especially from passive funds set up to track the index (and which must include Lion Finance in their holdings). Although the shares are up 69 per cent over the past year, Tusch-Lec says they remain attractive in light of the company’s strong earnings and a dividend yield of 2.5 per cent.
They are also a perfect portfolio diversifier, providing investment exposure to a part of the world rarely accessed by UK funds.
Risky, yes, says Tusch-Lec, but potentially rewarding long-term. The company’s market ticker is BGEO and code BF4HYT8.
Frasers Group
Alex Wright, Fidelity Special Values/Situations
Fund manager Alex Wright has had his hand on the tiller of funds Fidelity Special Situations and Fidelity Special Values for 12 and 13 years, respectively.
In the process he has made serious money for investors, generating five-year returns of 68 and 45 per cent. The two funds have near identical portfolios with big positions in blue chip UK companies such as Aviva, Lloyds and NatWest. Yet Wright is always looking for investments that sit below the FTSE 100 Index.
One of his current favourites is Frasers Group, a company majority owned by business tycoon Mike Ashley. Its shares are traded on the London Stock Exchange and form part of the FTSE 250 Index.
Wright is always looking for investments that sit below the FTSE 100 Index
Best known for Sports Direct, other brands sitting under its wing include House of Fraser, Evans Cycles, Flannels and USC.
‘The market often overlooks Frasers,’ says Wright, ‘yet the company’s strength lies in its business model. It leverages its scale to acquire discounted stock in bulk from the likes of Nike and Adidas, which helps boosts margins and profits.’
Wright also likes the fact that Frasers own their retail sites rather than lease them, providing significant property backing.
With sizeable stakes in Hugo Boss, electrical retailer AO, online store Asos and luxury leather goods brand Mulberry, he believes the company’s shares are attractively priced.
Over the past year, the shares have increased in value by just 5.6 per cent, but Wright believes their fortunes could change for the better. Its market ticker is FRAS and code B1QH8P2.
RELX
Job Curtis, City Of London Investment Trust
FTSE 250-listed investment trust City of London has been managed by Janus Henderson’s Job Curtis for nearly 35 years.
He has been instrumental in continuing to grow the fund’s dividend payments, with the result that it now has 59 years of annual increases under its belt.
Although Curtis’s modus operandi is to buy steady income-friendly UK stocks, he is excited by the prospects for RELX, a provider of analytics and decision tools, such as scientific, technical and medical information, for professional and business customers. It is the 19th largest holding in the £2.9 billion fund.
Curtis is excited by the prospects for RELX, a provider of analytics and decision tools
RELX’s shares have taken a hammering as a result of fears that AI might disrupt its business – they are down more than 40 per cent year-on-year. But Curtis says: ‘In my view, RELX is a likely beneficiary of AI, which it already uses across its various divisions: risk, legal, exhibitions and scientific, technical, and medical.
‘Indeed, its analytics and algorithms are proprietorial, as is much of its data.’
Curtis’s verdict is that all the signals point to a renaissance in the share price. Analysts are forecasting annual average earnings per share growth of 12 per cent for the next four years, and its shares look reasonably priced by historic standards.
The icing on the cake is an attractive dividend yielding 2.8 per cent – with divi payments in growth mode.
RELX’s market ticker is REL and code B2B0DG9.
Bloom Energy
Mike Seidenberg, Allianz Technology Trust
As its name implies, the £2.6 billion Allianz Technology Trust invests in some of the world’s leading technology companies – the likes of Nvidia, Alphabet and Microsoft.
It’s a strategy that has delivered handsome results: one and five-year returns of 75 and 164 per cent.
But manager Mike Seidenberg says the stock among the 45-strong portfolio that he is most excited about is US energy company Bloom Energy.
Seidenberg says the stock among the 45-strong portfolio that he is most excited about is US energy company Bloom Energy
Founded 25 years ago, the business builds solid oxide fuel cell systems that generate energy for commercial, industrial and data centre customers.
In a world of exploding growth in data centres – fuelled by AI – Bloom Energy sits in a ‘very favourable’ position.
He adds: ‘The company’s expertise in manufacturing these environmentally friendly fuel cell systems – which deliver energy 24 hours a day, seven days a week – means they are in a good position to meet robust demand.’
Bloom Energy’s shares have soared 257 per cent over the past six months. But as Seidenberg says, it’s a company that is in a perfect position to benefit from the boom in demand for data centres, powered by reliable energy. If the case for AI remains strong, Bloom Energy’s shares should continue to bloom.
As with Eli Lilly, UK investors can buy shares in Bloom Energy via an investing platform, but must complete a digital W-8BEN form confirming they are not a US taxpayer. It’s an exciting investment – but not without risk.
Fevertree
Nick Train (and Madeline Wright), Finsbury Growth & Income Trust
‘Fevertree invented the premium mixer market,’ says Train, ‘and continues to dominate it’
Nick Train has run the £762 million Finsbury Growth & Income fund for more than 25 years.
It was successfully to begin with, but less so in recent years. Over the past five years the fund has registered losses of 9.6 per cent, compared to a peer group average return of 39.4 per cent.
Yet he remains a top-class fund manager. Of the 21 UK stocks held in the trust, the stock that he believes has potential is premium drinks mixer brand Fevertree.
‘Fevertree invented the premium mixer market,’ says Train, ‘and continues to dominate it. A succession of competitors and copycats – including more than 150 small entrants and even soft drink titans such as Schweppes – have failed to eat into its market share.’
What Train is most excited about is Fevertree’s success in the US, especially the tie-up with North American drinks giant Molson Coors which has given the brand access to an enormous distribution network.
‘The US premium spirits market is 12 times the size of the UK’s,’ adds Train.
‘Fevertree’s trading statement earlier this month was well received, suggesting the benefits of the Molson Coors tie-up are coming through in new account wins.’
Fevertree’s shares are down 10 per cent over the past year, 69 per cent over the past five years.
Maybe Molson Coors will be a catalyst for the shares to recover sharply after years in the doldrums. Train and his army of investors hope so.
The trust has a 2.3 per cent position in Fevertree (market ticker FEVR, code BRJ9BJ2).
