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Black Friday: the investment bargains of 2021

It’s Black Friday this week and, according to research company Statistica, UK consumers take the event quite seriously. This year, the UK has accounted for more than 10% of all global Black Friday searches online and Brits are forecast to spend a record amount.

But while many of us will spend just a few days scouring the internet for bargains and others will be braving the shops and crowds this weekend, some people look for bargains all year round.

FundCalibre spoke to six Elite Rated managers to find out what their best bargain stocks of 2021 have been.

Andrew Lyddon, co-manager of Schroder Global Recovery:

“This year we have noted a number of compelling opportunities in Japan. The market has long been a value trap, with cheap valuations on offer but many investors being put off by some of the traditional governance structures associated with Japanese companies. While some of these risks remain relevant, we believe these are both changing, and that valuations more than account for the concerns.

“We purchased Nikon, the Japanese camera manufacturer, in January. We were attracted to the company’s strong balance sheet, but new earnings were challenged. This year shares have rallied 90% and we have trimmed our position twice to manage risk.”

Alan Dobbie, co-manager of Rathbone Income:

“Early in the year we added Ashtead, the US-focused heavy equipment rental firm, to our fund. Since then, its shares have risen by around 60%, benefiting from a strong bounce-back in US construction activity as the economy reopened.

“Thinking ahead, the trend towards renting, rather than owning, equipment like excavators, aerial work platforms and generators shows no signs of abating, and President Joe Biden’s plan to upgrade the US’s ageing ports, bridges and roads could add yet a further leg to growth. With the shares having performed so well this year, a compelling valuation case is now harder to make, but Ashtead’s strong growth prospects and solid balance sheet mean the stock retains its place in our fund.”

Niall Gallagher, manager of GAM Star Continental European Equity:

“ASMI is a Dutch semiconductor company. We believed the significance of its decades long research and development in epitaxy and ALD technology (atomic layer deposition – a key process in fabricating semiconductor devices) for the global semiconductor industry were under-appreciated by the market at the start of the year. The shares traded at less than half the valuation of its European and US peers but have more than doubled in 2021.”

Hugh Sergeant, manager of ES R&M UK Recovery:

“Somero is a dominant global manufacturer of concrete-levelling products, critical for the building of warehouses used to fulfil e-commerce orders.  At the onset of the pandemic – and for Somero in particular – the cyclical downturn in construction spending led to a few quarters of falling demand and the shares got hit very badly. We saw this short-term difficulty and an opportunity, and over 2020 we added significantly to our existing position. Over the last year, a combination of cyclical recovery and a structural element of increased demand for their products has seen a share price rise of over 150%.”

Richard Kaye, co-manager of Comgest Growth Japan:

“We bought Orix, a leading Japanese financial services group, last December at 6.6x price-to-earnings ratio and it is 10.9x now*. The stock has risen 53.2% vs. the 18.3% of the TOPIX index since then^ and its earnings have also grown over the same period.

“Orix’s profit growth and reassessment by investors reflect its growing presence among Japan’s under-served small companies for financial services from leasing, loans to real estate introduction and private equity, and a sharp benefit from Japan’s economic normalisation after Covid-19. The company’s worldwide renewables portfolio, with the largest (3 Gigawatt) solar capacity in Japan and stakes in Ormat, Elawan or Greenko, should enhance its growth in coming years.”

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%.”

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