Trustnet Magazine Issue 45 November 2018 | Page 50

In the back
48 / 49
There are still “hidden
growth” stocks that
offer exposure to rapidly
expanding businesses at
attractive prices
CRUX UK Special Situations’
Richard Penny names three
UK stocks whose growth is
underappreciated by the market
Secret
success
O
ctober’s sell-off across global
stock markets has had the
greatest impact on growth
shares. While the underperformance of
this sector has affected some of the UK’s
best and most expensive companies,
valuing its operation in
a similar way to AIA, a
Prudential
pure play on the sector,
Sometimes growth divi-
suggests upside for the
sions tucked away in larger shares. Recent emerging
companies can trade at a
market problems have
discount to their under-
dented sentiment far more
lying value. Prudential’s
than the long-term pros-
Asian subsidiary is not
pects for Prudential, but
exactly a secret and the
we believe an upcoming
shares have been strong
showcase of its Asian divi-
performers over recent
sion to analysts, and next
years. However, analysts
year’s de-merger of its UK
still believe the company
operation, should act as
trades at a discount and,
catalysts.
FE TRUSTNET
[ STOCKPICKER ]
many stocks still look expensive and
could have further to fall. However,
there are still “hidden growth” stocks
that offer exposure to rapidly expanding
businesses at attractive prices. Here are
three of the best.
Jadestone
Acquired growth can be
dangerous, with up to two-
thirds of deals harming the
value of buyers. Manage-
ment teams can overpay
for assets, often because
they are rewarded for build-
ing scale instead of creat-
ing wealth. However, we
believe Jadestone’s acqui-
sition of Montara in Aus-
tralia is a shrewd purchase.
The management, which
founded the business, has
a record of operating and
improving oil & gas assets.
After turning down many
transactions, it bought
Montara, an orphan asset
in a large company, for a
bargain price. The oil price
has risen since then and
we think management can
improve its performance,
even though there is upside
if current production levels
are simply maintained.
rewarding staff with equity
in the business. Its lack of
Alpha FMC
expensive sales partners or
We take a Goldilocks ap-
graduate recruits means Al-
proach to growth invest-
pha FMC is a lean company
ments: we don’t invest
and boasts higher produc-
while a company is unprov- tivity per consultant, em-
en, but we don’t wait until
ploying just 350 people in
the market is pricing in its
these positions, compared
prospects. One Goldilocks
with 500,000 at the Big
investment is Alpha FMC, a Four. The company floated
consultant to the fund man- in 2017 with a strong record
agement industry. The firm of organic growth, which is
targets the best employees
expected to continue over
of PWC and Accenture,
the next decade.
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