The world has been stuck in an environment of low economic growth for a long time now and, with geopolitical and economic uncertainty showing no signs of improvement, nothing is going to change any time soon, according to Steve Davis, manager of Elite Rated Jupiter UK Growth fund.
However, companies that can defy the odds and grow despite all these issues can be found – and not only in the south of England! They could be in niche sectors, have a big competitive advantage, have self-help opportunities or a combination of these things.
Here are two examples of companies ‘up north’ that Steve currently holds in the fund:
- Manchester United: After a tough couple of seasons, Man Utd are showing signs of life on the pitch again. Off the pitch, it is a powerhouse global brand with remarkable reach – for example its top match in the 2014/2015 season reached 137.3 million people worldwide (to compare, the Academy Awards ceremony reached 65.2m and the top NFL regular season game reached 23.7m¹). The TV broadcast rights money for the Premier League is more than triple what it was decade ago, and Man Utd have by far the most lucrative current kit sponsorship deal in football. Despite this business success, there is even more growth to aim for. To take just one example, there is only one official Manchester United merchandise megastore in the world and that’s next door to Old Trafford. There’s scope to open more in capital cities globally, particularly in emerging markets where the club has many millions of fans.
- Sirius Minerals: Sirius is the only resources holding in the fund and it has been the fund’s top positive contributor over the last year. One thing I like about the company is that it’s not a bet on the direction of the Chinese economy. In fact, Sirius is developing a large polyhalite (fertiliser) mine in Yorkshire, so the underlying story is one of increasing arable farm yields and feeding the world’s population. Getting planning permission for the mine was not an easy process, but the last of the permits has been granted and the project is moving into the financing/construction stage. This has been a very long-term holding for the fund – we first got involved on a small scale a few years ago and the mine won’t enter full production until about 2020. But I see the scale of the opportunity as potentially massive.
Steve says: Although the UK economy has been pleasingly robust so far in the face of ‘Brexit’ uncertainty, it still seems sensible to anticipate tougher conditions in the future and perhaps a mild recession, in my view. But a low growth world shouldn’t be a brake on our investment aspirations. I believe some exciting opportunities can still be found.
¹Source: Future Sport & Entertainment / Nielsen. Academy Awards global audience figure is an estimate only.