Financial website loveMONEY asked a string of fund managers and financial advisers to select a company that they liked – and asked them to explain why they saw it as attractive.
Here's what they had to say.
*Please note that none of these comments should be taken as stock recommendations.
The pharmaceutical giant, which is listed on the blue-chip FTSE 100 index, is a favoured name of Adrian Lowcock, investment director at Architas, who has personally invested in the stock.
He pointed out that the company had made progress on reducing costs and promoting growth, even though it faces significant headwinds in the shape of patent expiries.
“The company is looking to expand into new markets in Asia and Japan,” he said.
“It also has a strong pipeline of over 20 late-stage trials, which are promising but by no means guaranteed.”
This pipeline, he points out, has attracted interest from the company’s peers and its share price is supported by the potential for another takeover bid.
“The CEO continues to target annual revenues of $45 billion by 2023 compared to $23 billion in 2016, driven by successful new drugs coming on stream,” he said.
“While investors wait they are getting around 4% yield from the cash being generated by the business.”
Alex Wright, portfolio manager of Fidelity Special Values, has owned the stock for five years and it has been a top contributor over that period.
As the only listed company operating in the new niche market of litigation financing, the company initially struggled to tell its story to the market.
“By consistently delivering high returns and growing earnings, it forced the market to get to grips with its business model and recognise its leading position in a growth market,” said Wright.
He also pointed out that one of the reasons he likes to invest in financials was the possibility of coming across such complex and unusual business models.
“Most small-cap investors prefer simple growth stories, and shy away from complexity, which can leave these businesses at attractive valuations,” he added.
Looking ahead, he believes investors must be realistic. “Although the company has a bright future and could reward long-term shareholders handsomely, I don’t expect the next five years will yield the same degree of performance as the last five,” he added.
Charlie Huggins, a fund manager at Hargreaves Lansdown, likes Sanne Group, which handles administration processes, such as managing executive incentive plans, for investment houses.
The company services the alternative funds sectors, which has been attracting a lot of interest as strategies include investing in illiquid or riskier assets.
“Once Sanne is contracted to provide admin services, it normally does so for the life of the fund because it becomes so deeply embedded into the manager’s operations that it’s uneconomic to change administrators once set up,” he explained.
The group is growing out of the Channel Islands and now has a global network of offices, making it less dependent on any one market or asset class.
“Margins are strong and revenues have been growing strongly,” he said. “With most business tending to repeat, Sanne is in a strong position.”
In addition, its industry is consolidating and Sanne intends being one of the major players, having recently acquired a Mauritian-based provider of fund administration services.
“The deal is expected to be immediately earnings-enhancing, opening up significant growth opportunities in emerging markets and the potential for cost savings,” added Huggins.
Guy Anderson, manager of The Mercantile Investment Trust would look for a track record of earnings sustainability, sensible capital allocation and strong returns if he was to pick one stock.
“The company would obviously have to be attractively valued and have a positive trading outlook,” he said. “I think Spirax-Sarco Engineering ticks those boxes.”
The company is a world leader in the control and efficient management of steam and industrial fluids. The fact it doesn’t sound exciting means it can be overlooked and undervalued.
“Sprirax-Sarco is a global industry leader featuring the best of British technology and has a long-term track record,” he said.
“It has a sustainable competitive position, though a technically led sales approach and low exposure to more volatile commodity-related end-markets.”
Anderson also pointed out that the business, which is more than 125 years old, has consistently grown the dividend for more than 45 years at an average of over 10% per annum.
“We also see near-term support from strong global industrial production, which we believe will lead the company to outperform market expectations of an already healthy 20% earnings growth this year,” he added.
Trevor Green, Head of UK Equities at Aviva Investors, has owned the company since Miles Roberts arrived as chief executive officer in 2010.
It is now a leading Pan European packaging company exposed to growing end markets, including the e-commerce space where they help retailers with supply chain optimisation.
“The company has clear financial targets in relation to return on sales, return on capital employed and cash conversion, where it continues to deliver,” he said.
Green pointed out it has built up an excellent track record of delivering sustainable shareholder returns.
“The share price has deservedly been strong over the past seven years, culminating in the business being near the very top of the FTSE 250 Index in terms of size today,” he said.
The company has also made selective acquisitions over the years which have been integrated quickly. In most cases, these have superseded their initial cost and revenue synergies.
“It is just about to enter a new growth phase after announcing the acquisition of Interstate, which is an East Coast United States paper and packaging business,” pointed out Green.
This acquisition has strong strategic and financial rationale and is well supported by some of their key European clients.
There are many growth angles to this deal, including the opportunity to use their market-leading skills in e-commerce in Europe and the US,” he added.
This company is a leading catering and support services provider in the UK and Ireland – and is involved in a wide variety of operations.
In fact, it supplies food, security, hospitality, building maintenance and cleaning, and works behind the scenes at everything from sports events to oil rigs and military bases.
Graham Spooner, investment research analyst at The Share Centre, has highlighted the company because it provides services that are in demand.
“People will always need to eat and as this is the world’s largest contract caterer, providing food and other services to customers in 50 countries, Compass would be my choice,” he said.
The business, which is defensive and less susceptible to economic downturns, has a healthy new contract pipeline with organic growth at the top of the management’s agenda.
Spooner believes this is an attractive combination.
“The group has a good track record, and though not obviously cheap, should provide investors with a lower risk share, as well as the ability to grow steadily and improve dividends into the future,” he said.
Saturday night at the movies has long been a popular pastime – and it also has possibilities for investors, according to Ian Forrest, investment research analyst at The Share Centre.
“Cineworld operates cinemas in the UK but the main appeal is its growing presence in Eastern Europe,” said Forrest.
The business was founded in the mid-1990s as a private company, listed on the London Stock Exchange a decade ago, and is now one of the leading cinema groups in Europe.
Earlier this year, Tony Bloom, Cineworld’s chairman, revealed that more than 100 million people came through the doors to watch a film during 2016.
“I would have found this inconceivable when we first started the Company with just one multiplex in Stevenage in 1996,” he said.
Looking ahead, Forrest remains optimistic about its prospects.
“The steady stream of blockbuster movies, including “Kingsman: The Golden Circle” and “Star Wars: Episode VIII”, as well as good retail sales, suggests there is further growth potential,” he said.
Helal Miah, investment research analyst at The Share Centre, believes GlaxoSmithKline, the pharmaceutical giant, as having strong longer-term potential.
“After a sensible, lower risk stock is out of the way, my wild choice would be a very small higher risk company called Strat Aero,” he said.
This company provides training and consultancy solutions to the aviation industry for unmanned aerial systems, or so-called drones.
“I am a keen flyer of model planes, helicopters and drones and have seen the development of these flying machines over the years from a hobbyist perspective,” he said.
Miah believes these new technologies have vast commercial possibilities within surveillance and security, as well as film and TV production, farming, construction and even internet shopping.
“Major retailers and logistics organisations must explore the possibilities or risk getting left behind,” he said. “The sky is the limit.”
Of course, the opportunity for Strat Aero lies in the possibility of landing a big contract with a major corporation or government.
“The risk is that it’s a tiny operation in a nascent industry, where major corporations have big budgets to fund their own research, technological developments and training,” added Miah.
There are a few reasons for buying Prudential, a provider of long-term savings and protection products to customers across four continents.
That’s the opinion of Martin Todd, who works in the European Equities team at Hermes Investment Management.
“The first is growth in Asia as this has been a rapid-growth market for them for many years,” he said. “It also has huge potential.”
Todd pointed out that the Pru believes there are around 3.3 billion potential customers across Asia – which equates to a lot of potential considering on 15 million are currently clients.
“The insurance market in Asia is still at a very early stage and there is incredibly low penetration of products in many countries,” he said. “This is the real jewel in the crown for Prudential.”
In addition, the company has a strong US business, as well as the possibility of making some positive changes to their structure.
Todd highlighted the recently announced merger of its UK insurance business with M&G, its UK fund management business, and said there were disposal options within the former.
“By selling off its non-core annuity business it can raise more money to either reinvest in practical areas such as Asia, or to give back to shareholders,” he said.
He doesn’t believe the company’s valuation reflects its growth potential.
“It’s a really interesting stock and over the medium to long-term time – three to five years – it has the potential to significantly outperform,” he added.
The information included in this article does not constitute regulated financial advice. You should seek out independent, professional financial advice before making an investment decision.