With all the negative headlines from Europe, the easiest or most conventional investment strategy is to stay as far away as possible from any European investments. There would be fewer questions from our clients.
The warmth of the crowd is always comforting. But let’s face it: We cannot expect above-average returns if we do not make well-informed choices to deviate from the crowd. So a few of us decided to head to the U.K. in search of investment ideas. We specifically picked the U.K. because, amidst all the noise, it is still the seventh-largest economy in the world. It has a democratic and open society, a stable political backdrop, a well-established legal framework, a relatively flexible labour market and a strong enforcement of intellectual and private-property rights. Many U.K. companies also have executive compensation linked to total shareholder returns.
So, we rolled up our sleeves for some Trimark-style blocking and tackling. First, we filtered all the U.K.-listed companies for ones that meet our investment criteria. Then, we studied the companies’ annual and quarterly reports, conference transcripts and industry reports to identify companies with wide business moats (i.e., strong competitive advantages and high barriers to competition).
In the end, we met with CEOs and CFOs of 22 companies over five short days. Many of them had never been visited by investors from Canada. We met with a world-class bank, the largest (and still growing) pizza chain in the U.K., a best-in-class travel retailer, the largest probe maker in the world, a unique veterinary pharmaceutical company and North America’s largest supplier of private-label seals for heavy machinery. And that is just to name a few. We discussed the companies’ long-term strategies, competitive landscape and enjoyed plant and facility tours.
Needless to say, the trip was fruitful in finding high-quality companies at discount prices.
Sometimes if you have the courage to veer away from the crowd, you’d be surprised at what gems you find under the rubble.