3 Share Ideas From Top Stock-Pickers
LONDON -- A little while ago, in a series of articles here at The Motley Fool, I highlighted some of the best share ideas from a select pool of expert stock-pickers.
Today, I'm going to take a look at how their midcap picks have performed so far and tell you why two of the shares -- FidessaGroup and Devro -- could still make good investments today.
As an added bonus, I have a new blue-chip share idea for you that two of our experts are very keen on.
The pro-pickers perform
The following table details the performance to date of the midcap picks that featured in the series, together with the performance of the FTSE 250 index.
Highlighted Share Price (pence)
Current Share Price (pence)
FTSE 250 Gain/(Loss)
Overall, the experts' picks I highlighted for you are showing a handsome return so far, with high-tech toolmaker Oxford Instruments leading the way.
However, it's the two laggards that I think are particularly interesting for investors today, and I'm going to tell you what our experts have to say about them.
Fidessa is a supplier of software and systems to the financial-services industry. Nick Train (of Lindsell Train U.K. Equity and Finsbury Growth & Income) and Charles Montanaro (of Montanaro U.K. Smaller Companies) are both big fans of the firm.
Train has described Fidessa as "an exceptional company by all criteria and certainly one of the U.K.'s handful of global technology leaders." In 2010, he said he felt Fidessa could be a company with a price-to-sales ratio of four. Train increased his shareholding in 2011. His buys included a tranche in July, when the shares traded between 1,835 pence and 2,125 pence. I highlighted Fidessa for you a couple of months later when the price had dropped to 1,685 pence.
Moving on to 2012, Fidessa is expecting flat sales this year. Ongoing uncertainty in the financial markets and low equity-trading volumes have led to increased cost constraints among Fidessa's core customers: the world's investment banks.
Train's response? He said recently: "We are inclined to add to holdings. On less than 2.0x annual sales, with a RoE [return on equity] of 24%, Fidessa looks strategically very cheap."
I don't know whether Train still believes Fidessa could be valued at as high as four times sales. But if it were, the shares would be trading at close to 3,000 pence rather than the current 1,408 pence.
Devro is one of the world's leading suppliers of collagen sausage skins. Two of our pro stock-pickers are big supporters of the company. Indeed, Devro is the largest holding in John McClure's Unicorn U.K. Smaller Companies fund and the second-largest holding in Montanaro's U.K. Smaller Companies investment trust.
McClure likes the simplicity of Devro's business and its strong cash-generation, and he shares with Montanaro the view that the company is "positioned to take advantage of significant structural growth drivers within the industry." Both managers have frequently sung the company's praises over the years. Montanaro's most recent bullish tune was aired in August, when the shares were trading not far below their current level.
Montanaro is interested in backing great businesses for the long term. Many holdings have been in the group's portfolios for more than 10 years. Montanaro looks for companies whose directors have integrity and realism and who communicate well with him about the business. In the case of Devro, the chairman recently communicated more by deed than word: He bought 40,000 pounds' worth of shares -- at a bit above the current price of 311 pence -- on the day the company released its latest trading update.
There's a bit more to Standard Chartered than the other four FTSE 100 banks. For one thing, Standard Chartered earns 90% of its profit from the Asia-Pacific, Middle East, and African regions; and, for another, it has delivered 10 successive years of record profits.
Veteran blue-chip stock picker Richard Buxton (Schroder U.K. Alpha Plus) has held Standard Chartered ever since the Alpha Plus fund's launch in 2002, and Mark Sheppard (Manchester & London) is another big fan.
Buxton was happy to add 100,000 shares to his Standard Chartered holding between November 2010 and May 2011, when the shares were trading well above today's level. He has since bought more shares, notably in August this year when the price crashed following allegations the bank had breached U.S. sanctions against Iran.
Meanwhile, Sheppard had this to say: "Though the bank suffered a recent setback with the Iranian payments scandal, underlying earnings momentum remains good, and the current valuation of <1.5x book value seems an undeserved discount to its historic average of around 2.5x."
More recently still, Sheppard's Midas Investment Management group put out a note saying, "Standard Chartered is currently trading on a 12 month forward earnings multiple of 9.8x and, given that the bank remains a potential bid target, this provides an attractive opportunity to buy the shares."
At the current price of 1,485 pence, Standard Chartered's book value remains less than 1.5, and the forward earnings multiple remains less than 10.
Another expert pick
One super-investor who didn't feature in my pool of experts is U.S. billionaire Warren Buffett. Buffett rarely invests outside the U.S., but this year he's made a big bet on one British household name. If you'd like to know the name of the company, what makes it so attractive to Buffett, and the price he paid for his shares, I recommend you help yourself to the free, no-obligation Motley Fool report "The One U.K. Share Warren Buffett Loves." You can have this limited-time report dispatched to your inbox immediately -- simply click here.
The article 3 Share Ideas From Top Stock-Pickers originally appeared on Fool.com.G A Chester does not own shares in any of the companies mentioned in this article. The Motley Fool owns shares in Devro and Standard Chartered and has recommended shares in Fidessa. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. Try any of our Foolish newsletter services free for 30 days.