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This article first appeared in Portfolio Adviser on 20 February 2024 Health and money are two fla...
As we head into the last few weeks of 2021, five Elite Rated managers tell us about some of the best performing stocks in their portfolios this year.
Vincent Ropers, co-manager of TB Wise Multi-Asset Growth
“One of our best investments of the year was in the Mobius Investment Trust. We invested in the trust at launch in 2018 on the back of our previous relationship with the managers and like its concentrated focus on smaller emerging markets companies with upside potential from improvements in their corporate governance.
“By investing in companies not included in the broad indices and taking an activist approach, the trust’s performance doesn’t look anything like the market, as illustrated by its 47.5% return year-to-date versus a meagre 3.5% for the emerging market index. This strong performance came despite delivering 71% already in 2020 from the March lows (versus 41% for the emerging market index). We took advantage of a widening of the discount in May to increase our position to more than 3%.”
Adrian Gosden, manager of GAM UK Equity Income
“Bakkavor is a manufacturer of prepared food, with a market cap of £700m. It has been a strong performer in 2021, is listed on the small cap index and is controlled by the Gudmundsson family.
“Recent trading has been encouraging with company earnings beating expectations. Furthermore, management has done a good job at managing supply disruptions and protecting revenues. This stems from established client relationships where Bakkavor is regarded as a key partner. The shares trade on 10x forward PE, cash conversion is impressive, and the balance sheet is robust. In fact, debt has been falling faster than anticipated due to strong cash control.”
David Coombs, co-manager of Rathbone Strategic Growth Portfolio
“In 2021, Dexcom, which designs and manufactures continuous glucose monitoring (CGM) devices for diabetes patients, has been a key contributor to returns. We first bought Dexcom in our Multi-Asset Strategic Growth Portfolio fund in October 2020. Its wearable device allows sufferers to track blood glucose levels in real time on their app and share data with their doctor. Dexcom’s market leading technology aims to deliver better clinical outcomes and offers the possibility of lowering long-term cost to healthcare providers by reducing the chances of serious complications from the mismanagement of the condition.
“This year’s stellar results and long-awaited news on the release of their new CGM device have driven the stock price to all-time highs. We used the volatility in the share price early in 2021 and in the spring to buy more, before the trimming into the autumn as the price continued to rise. This kept our position size appropriate in light of the strong performance and reflected how the valuation had pressed on in a short space of time. Being active in this way also helped to increase the extent to which the position has positively contributed to returns.”
James Hanford, analyst and portfolio manager, Comgest Growth Europe ex-UK
“Similar to 2020, ASML is one of our notable performers this year in terms of both profit growth and share price performance, with shares up 90% year to date*. While our investment is based on the strength and visibility of the potential growth outlook for the next decade, clearly this year ASML has benefited from being the crucial supplier to the semiconductor industry at a time when chip demand has increased materially. Demand for ASML’s machines has been extremely strong and the company has executed its business strategy well, such that we estimate that ASML’s profits should be 60% higher in 2021 than 2020.
“Our conviction in ASML, which led us to acquire our position three years ago, came from our analysis of the company’s prospects into 2030 and beyond taking into account the changes in the computing landscape which are likely to happen over that time. While we are conscious that Covid-19 has caused an abnormal surge in chip demand due to the explosion in home learning and home working, we remain confident we should see long-term growth in demand for ASML’s products. This growth is likely to be driven by structural trends such as the 5G rollout, continued applications for AI, and increased use of semiconductors as well as the competitive position of the company.”
Martin Hawtin, manager of GAM Star Disruptive Growth
“Seagate, the data storage company, was one of our best performers this year. It benefits from accelerating data-storage growth as enterprises adopt new data technologies, like AI, the Internet of Things, and Automation, helping return the company to top-line growth and gross margins to the mid- or upper-end of management’s long-term range.
“Cloud and enterprise IT demand may continue to improve, aiding Seagate’s sales and margins. The healthy cloud and enterprise storage demand and a stable pricing environment could support low-teens sales growth or better.”