Latest news with #GlobalEliteCompanies
Telegraph
19-05-2025
- Business
- Telegraph
This dull-and-reliable investment offers stability amid stomach-churning volatility
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. We all crave fun and excitement. In the stock market, that means dull-and-reliable investments often get overlooked. But during periods of stomach-churning volatility, as we have experienced during 2025 so far, the virtues of the dull stuff suddenly become much clearer. Dull-and-reliable investments tend to make themselves known through two key attributes. One is relatively stable share prices. The other is attractive cash returns; what could be duller after all than a business with nothing more exciting to do with its cash than to dutifully hand it back to its owners. US employee benefits specialist Unum displays both these characteristics. This may help explain why top investors have been increasing their bets on its shares. Nine of the world's best fund managers, all among the top-performing 3pc of over 10,000 equity pros monitored by financial publisher Citywire, hold Unum's shares. And increased smart money interest has this month seen the company propelled to be among the 74 constituents that make up Citywire's Global Elite Companies Index, which represents the very best ideas from around 6,000 stocks held across the portfolios of the world's best money managers. Unum is an insurance company that specialises in selling a range of work-related financial protection and wellbeing services through employers and also directly to individuals. Its portfolio includes disability, life, accident, critical illness, cancer, dental and vision cover. Offering such a broad range of policies makes it attractive as a one-stop-shop to clients, especially as employers increasingly look to compete for staff based on the overall benefits they offer as opposed to just salary. Unum is more profitable than most of its peers. Its leadership in disability insurance is a particular advantage that underpins its competitive position. The complexities of disability insurance limits competition and differentiates Unum to customers. This is reflected a return on equity of over 20pc reported by Unum in 2024. Meanwhile, book value per share has grown at an annualised rate of 9pc over the last ten years. The company generates large amounts of cash from its business, too, which it returns through share buybacks as well as dividends. Buybacks have more than halved Unum's share count since 2007. Buybacks are only a real benefit to shareholders if the shares bought offer the prospect of a good return. Fortunately, in the case of Unum this looks like the case based on its shares' forecast free cash flow yield of over 10pc and a price equivalent to less than nine times forecast earnings for the year ahead. Unum has said it will aim to buy back between $500m (£376m) to $1bn of shares this year and is forecast to pay out over $300m in dividends. Taking buybacks at the proposed mid-point, that's equivalent to a hearty total shareholder yield (buybacks and dividends as proportion of market capitalisation) of 7.3pc. British buyers of the shares, which are available through all the UK's main brokerage platforms, need to fill out the correct paperwork to minimise withholding tax on dividends and should also check for any additional overseas dealing charges. The company looks particularly well set up for cash returns given there is $2.2bn of liquidity at the holding company level, which is expected to rise to $2.5bn by the year end. That's well above a target level of about $500m. The strong financial position has been helped by a reinsurance deal covering a $3.4bn chunk of Unum's closed book of long-term care insurance policies, equating to 20pc of the total. Closed books are made up of policies that have previously been sold and are still being serviced but are no longer being marketed. The deal reduces risk as well as freeing about $100m of capital. Business risks have also been reduced over the last several years by moving the investment portfolio into safer assets. However, taking on risk is what the insurance game is all about, which means the possibility for upsets always exists. One such recent worry for investors has been an uptick in disability claims in Unum's first quarter. Management believes this is nothing out of the ordinary, though, and consistent with long-term trends. More generally, sales growth and premiums are both strong and the company believes digital investments will continue to help it attract new customers while nudging up the persistency of policies that have already been taken out. There's plenty to take comfort from. During times of uncertainty, that's a valuable thing, especially when it is accompanied by large cash returns.
Telegraph
05-05-2025
- Business
- Telegraph
IT meltdowns cost billions per year. This company is paid to avoid them
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. If you're going to develop software for a financial institution, you'd better make sure that it doesn't suffer glitches. The world of pain that awaits a bank or asset manager that experiences an IT meltdown can include customer fury, millions in fines and settlements and a blow to their reputation that can take years to rebuild – with no guarantee of fully recovering. For the technology firm responsible, the contract is unlikely to be renewed and their name in the industry will be mud. But get it right and the bond of trust can be financially rewarding. Just as well, then, that SS&C Technologies is good at this stuff. This US-based tech business provides a wide array of software and services to banks, hedge funds, private equity and asset managers, in areas such as funds accounting, investor reporting, risk analytics and regulatory compliance. It also offers administrative tech services in the healthcare sector and has been active in its field for nearly 40 years. SS&C Technologies has made extensive use of mergers and acquisitions to supplement its organic growth over the years. While this has made it a fast-growing business, it also led to a period of necessary restructuring and temporary slowdowns in momentum in both trading and the shares. For some investors, this represents an opportunity. Some of the world's most successful investors have bought into SS&C Technologies, each of them among the top 3pc of the more than 10,000 equity managers whose performance is tracked by financial publisher Citywire. Their level of conviction means that SS&C Technologies has been awarded a top AAA rating by Citywire. It is also a constituent of Citywire's Global Elite Companies index, which tracks about 80 of the very best ideas of the world's best fund managers from the 6,000 stocks held across their portfolios. There are 10 of these investors on the company's share register, including Evan Fox, whose holding sits in the Pzena Mid Cap Value Fund he manages. The analyst on Fox's team who covers the stock is Akhil Subramanian, who said the fund invested as the company consolidated its business following 'heavy M&A activity'. Subramanian says: 'We invested in late 2021 on the premise that the company's restructuring was nearing completion, and that organic growth would accelerate, which it has begun to do.' The shares are currently around the level when Fox's team first started buying over three years ago. Over the course of the past five years, SS&C Technologies has moved to simplify its internal structures and refinance debts. It has also been buying back shares, which it has in the past regularly issued to part-fund acquisitions. It has also launched a range of new products and upgrades, secured a string of additional institutional clients and continued to pursue takeover deals. Customers of SS&C Technologies include Federated Hermes, Aberdeen and Jupiter Asset Management. Subramanian noted that SS&C Technologies was a 'sticky business' that attracted strong customer loyalty, with a client retention rate in the high-90pc area. This helped it manage price increases during recent periods of inflationary pressure. Subramanian also pointed to the company's substantial cash flows that underpin its financial health and ability to return cash. Shares in SS&C Technologies, which are listed on the tech-heavy Nasdaq exchange, are available through the UK's main stockbrokers. Potential buyers should fill in the forms needed to minimise withholding taxes and check for any additional dealing charges. SS&C Technologies has a solid track record with adjusted earnings per share (EPS) growing at an annualised rate of 7.2pc over the last five years, while annualised growth is forecast to be 9.1pc over the next two. The company also boasts solid operating margins, which rose from 21.1pc to 22.8pc last year. Meanwhile, the balance sheet is strengthening. Net debt is expected to drop from 2.8 times earnings before interest, tax, depreciation and amortisation (Ebitda) last year to a much more comfortable 1.6 times by 2027. Despite these attractive characteristics, the valuation of the shares is far from challenging. SS&C Technologies stock trades for 12.8 times this year's forecast earnings, low for a tech business, and are expected to pay a dividend yield of 1.3pc. This is a quality player worth owning. Questor says buy Ticker: NYSE:SSNC Share price: $77.70 Miles Costello is a contributing journalist to Citywire Elite Companies
Telegraph
28-04-2025
- Business
- Telegraph
After seven years of tough Fed restrictions, this bank is about to be set free
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. Banks can be incredibly accident-prone. Fat-fingered trades, compliance failures, loan-book blow-ups and run-ins with regulators seem to be par for the course across many of the world's big lenders. A case in point is Wells Fargo, the US-headquartered multinational financial services group. It has found itself mired in controversy several times over the years, including after it admitted levying insurance charges on people with car loans without them knowing about it. But its biggest snafu came in 2016, when staff were found to have created 1.5 million fake deposit accounts in order to meet aggressive sales targets. As well as public opprobrium and hundreds of millions in fines and settlements, the scandal led, in 2018, to the Federal Reserve imposing a $1.95 trillion asset cap on the bank. In essence, this limited the bank's ability to expand its balance sheet, substantially grow its loan book or power ahead with its trading business until America's central bank was happy it had put its house in order. Its rivals on Wall Street, including JP Morgan and Citigroup, were able to expand their market share, while Wells Fargo was limited in what it could do. The good news for the bank, and for its shareholders, is that the Fed is reportedly preparing to lift the cap during the course of this year after Wells Fargo managed to resolve a string of regulatory actions against it. While the bank's shares have gained ground in anticipation since Reuters first reported the likely move late last year, they remain attractive compared with peers. While there are now worries that a slowdown in the US economy could hit banks hard, and share prices in the sector have fallen to reflect this, Wells Fargo is nevertheless very popular with world's best-performing fund managers. It is backed by 28 of these investors who are each among the top 3pc of the more than 10,000 equity managers whose performance is tracked by financial publisher Citywire. The company is rated AAA by Citywire, based on the high level of smart money backing. Its shares are also a constituent of Citywire's Global Elite Companies index which tracks around 80 of the very best ideas from the around 6,000 stocks across top managers' portfolios. Wells Fargo's New York-listed shares are available through the UK's main stockbrokers but buyers should be sure to fill in forms for minimising withholding tax and check with their provider about any additional dealing charges. The potential for Wells Fargo to be free to grow is not the only reason to buy the shares. The group beat analysts' forecasts in the fourth quarter, driven by a stellar performance in investment banking, an area the bank has been prioritising given it can be very lucrative and is also 'asset light', which means it is not a drain on the constrained balance sheet. Wells Fargo is also forecasting an increase in net interest income – the balance of what it charges borrowers and the amount it pays out to savers and a closely watched measure of bank profitability. The picture is complicated by Trump's blizzard of tariffs earlier this month, which, if it plunges the US into a recession, will be bad for all banks. Yet, although this makes any bank a reasonably risky buy, Wells Fargo's relative weakness against bigger peers also means it potentially has less to lose and more to gain from swings in sentiment. During the market rout that followed Trump's tariffs announcement, shares in the bank fell less than those of Citigroup, for example, though admittedly on a par with JP Morgan. For now, Wells Fargo's various businesses are looking resilient. The consumer division, which would be expected to be vulnerable in a downturn, has been showing signs of growth, the bank said in January. Provisions for potential credit losses have been falling. The bank has been making progress in its wealth management arm and the surge in growth of its investment banking unit shows it can compete with the biggest players for deal fees. Wells Fargo's shares trade on 11 times next year's forecast earnings and carry a prospective dividend yield of 2.6pc. One for the longer term.
Telegraph
21-04-2025
- Business
- Telegraph
Diversify your portfolio's power with this elite energy business
Diversification has long been the watchword for the risk-conscious investor. If you're going to buy into a company, make sure it is well spread in terms of geography, assets and business mix. Applying the idea to renewables investing is often less straightforward, with so many companies committed to a single power source, say, wind or solar. They are generally heavily exposed to a specific country or part of the power supply chain too. Enter Engie, the French-based energy utility that is about as diversified as they come. The group traces its origins back to the former state monopoly Gaz de France, which merged with French multinational Suez in 2008. It changed its name from GDF Suez to Engie in 2015, in part to reflect its decision to refocus around the energy transition. While the group still owns and operates gas-fired power stations, it has moved heavily into renewables, including solar, wind, hydropower, hydrogen and biomethane. It builds local energy networks, including power transmission lines, as well as on-site commercial production facilities. Operating globally from North America to the Middle East, it also maintains pumped-storage units and batteries to regulate power supply. Oh, and it's in nuclear energy management and caters to the electricity consumption needs of businesses of all sizes. Engie's shares, listed on the Paris arm of the Euronext exchange, sit in the portfolios of some of the world's best investors. Eight top-performing equity managers have backed the company, each of them among the top 3pc of the more than 10,000 professional investors tracked by financial publisher Citywire. The company is AAA rated by Citywire Elite Companies based on the convictions of these managers and it is among the 79 constituents of Citywire's new Global Elite Companies index, which represents the very best ideas from around 6,000 stocks backed by the top investors it tracks. One of these top investors is Philip Wolstencroft, portfolio manager of the Artemis SmartGARP European Equity Fund. He reckons Engie is attractively valued at 9 times forecast earnings, with a 'healthy' dividend yield over 7pc expected over the next 12 months. Wolstencroft says: 'The outlook for the business is also positive – it released guidance back in February that points towards a business that is benefiting from a high-class management team and has a good visibility-of-earnings profile as the quarters progress. 'This has caused the analyst community to revise up estimates for a number of items on the income statement.' Engie shares are available through the UK's main stockbrokers, though potential buyers should be sure to fill in the forms minimising withholding taxes and check with their provider for any additional dealing charges. It is the company's status as a regulated utility that helps to explain the valuation. It generates reliable and predictable earnings and cashflows that underpin a very generous dividend, but is not being viewed as a growth play, causing its shares to be priced at a relatively lowly multiple. But while Engie may not be the raciest of businesses, it is growing. It is aggressively adding new power generation capacity, committing to €21bn to €24bn in capital expenditure from this year to 2027, some three-quarters of which is earmarked for spending on renewables, batteries and power networks. It is aiming for a compound annual growth rate in earnings before interest and taxes, excluding nuclear, of 10pc between 2021 and 2027 – and in February Engie upgraded its earnings outlook for the next three years. The group uses a measure called net recurring income group share to highlight how much of its profits can be relied on to automatically recur each year. Its aim is for the figure to be as high as €5bn in the 2027 financial year, which compares with €4.1bn last year. It must be noted that Engie's earnings will fluctuate in line with prices, and volatility, in the energy market. It is also likely to divert investment that would have gone to the US in the light of President Trump's freeze on funding to his predecessor's Inflation Reduction Act, which promoted green energy investment. Still, this quality company has numerous options elsewhere as well as numerous smart-money backers.
Telegraph
14-04-2025
- Business
- Telegraph
This French gases giant is more resilient than it seems
Questor is The Telegraph's stock-picking column, helping you decode the markets and offering insights on where to invest. At a time when global markets are reeling from tariff twists and turns, there's something to be said for seeking out companies with share prices that display relative calm. Air Liquide may seem an unlikely company to fit this billing. France's industrial gases giant derives two-fifths of its sales from the Americas and many of its customers are sensitive to global economic conditions. However, scratch beneath the surface and Air Liquide is more resilient than it first seems, which is reflected in its shares being up 7pc in 2025 and only off 3pc since the market-wide sell-off began in late February. The work it undertakes is generally underpinned by large, long-term contracts tied to specific customer projects, such as recent US wins to supply gases for Micron's chip manufacturing and LG Chem's battery operations. The gas plants Air Liquide builds adjoin the projects they serve and are operated by local subsidiaries. As such, while Air Liquide is an international company, it avoids tariffs by operating as a collection of local businesses. There is also comfort to be taken from the fact Air Liquide enters this testy moment for the global economy in rude health. It is well underway with a transformation plan to invest more in growth while raising margins with the help of efficiency savings – nearly €500m (£434.2m) so far since 2022. The strategy has been paying off handsomely, which is something that's underlined by the popularity of Air Liquide's shares with the world's best fund managers. Twelve of these individuals, all identified by financial publisher Citywire as among the top 3pc of over 10,000 globally, back the company. Not only does this give Air Liquide Citywire's top AAA company rating, it also earns it a place as one of just 79 stocks in Citywire's Global Elite Companies index, which tracks the very best ideas of the world's best managers. In a sign of the ongoing progress at the company, management has recently decided to extend its margin improvement target for 2022 to 2026 to 4.6 percentage points. The group, which reported a 19.9pc operating margin in 2024, originally had a target for a 1.6 percentage point improvement, which was doubled to 3.2 a year ago. Air Liquide is also ahead of plan with its investment objectives. Commitments from the start of 2022 to end 2024 add up to €12.7bn, which means it is likely to surpass a €15bn cumulative target by the end of this year. The high level of investment has helped the group's capital-hungry operations exceed another target for annualised sales growth between 5pc and 6pc between 2021 and 2024. It actually managed 6.5pc. Margin gains amplify the benefit of sales growth on profits. Annualised earnings per share (EPS) growth was 8.4pc over the last three years and is forecast to ratchet up to 12.1pc in the coming two. While the potential for tariffs to cause a global economic downturn is a danger because of the large number industrial customers Air Liquide has, the business is also riding some strong long-term growth trends. The company has forged a strong position in the market for green hydrogen. While the pendulum of sentiment has swung to an 'anti-woke' position, the energy transition continues to have strong support in Europe where Air Liquide does a lot of business. In fact, the company has welcomed the current environment as providing more realism about hydrogen's potential. Air Liquide is also benefiting from the boom in AI and attempts by countries from across globe to forge semiconductor self-sufficiency because of the vital role gasses play in chip making. And the healthcare industry, which accounts for 16pc of sales from the dominant gas and services division, provides Air Liquide with a defensive end market. The business also has defensive characteristics thanks to the length of its contracts which are linked to the lives of the assets they serve. The big investment commitments it has made over recent years, which are only announced when the company is sure everything will go ahead, also give visibility on future revenues. The concentrated nature of the industrial gases sector helps underpin pricing, which is especially helpful given costs are sensitive to the oil price. Recent oil price falls are a plus. Encouragingly, while investment has been increasing at Air Liquide, debt has also been falling. The company has also continued to grow its dividend, which has risen at an annualised rate of almost 7.8pc over the last 20 years. British buyers of the shares, which are available through the main UK broking platforms, need to fill out the right paperwork to minimise withholding tax on those dividends. Priced at 24 forecast earnings, the valuation reflects some of the recent improvements, but given ongoing progress, it is a price that many of the world's best investors are happy to pay. Questor says: buy Ticker: EPA:AI Share price: €168.34
