Wed. Jan 19th, 2022

Much has been done of the resilience of the UK’s smallest businesses over the past five years, but UK medium-sized businesses have also proven themselves in these difficult times.

The FTSE 250 is the 101st to 350th largest company listed on the London Stock Exchange, many of which have faced major challenges due to Brexit and the global pandemic. Some sectors have already bounced back from vaccine announcements and subsequent implementation, but others could still make big profits once the economy is in full swing.

The mid-cap index is more nationally focused than the FTSE 100 large-cap index: FTSE 250 companies generate around half of their revenue in the UK compared to FTSE 100 companies, which account for about 80% of overseas sales.1

Mid-cap companies also have fewer profit disappointments than the shares of smaller companies. With the sentiment turning in favor of the UK, they could be at the most interesting point for investors.

Our managers with an Elite category are optimistic about these four UK mid-caps:

Howden Joinery Group plc

Howden supplies kitchens and carpentry products to the construction industry. The company is the first stake in the ASI UK Ethical Equity Fund2, and manager Lesley Duncan, claim to have outperformed their peers.

Duncan says: “Howden also has several initiatives that should allow it to gain more market share. These include new formats of deposit, digital investment and a wide range of auxiliary elements of kitchen, that will favor his market share and his potential of growth of income ”.

IT fluid systems

TI Fluid Systems develops, manufactures and supplies automatic fluid storage, transport and delivery systems. According to Ninety One UK Special Situations UK co-manager Steve Woolley, the company is a business with light structural capital growth that generates enviable returns on invested capital with abundant free cash flow.

He says: “The company is the world leader in the manufacture of brake and fuel lines for cars, as well as the number three in the production of fuel tanks. Although these products do not seem glamorous, they play an increasingly important role in controlling emissions and fuel efficiency.

Pets at home plc

Pets supplies pet products, including food, toys, bedding, medications and accessories. Chris St John, middle capital manager at Axa Framlington in the UK, believes the company will benefit in the future from the technology investment it has already made.

He says: “Pets at home are starting to increase the number of VIP members. They currently have 5.7 million active customers and, over time, this number is expected to grow and the same customer base to buy more products and services repeatedly.

Coats Group plc

Coats Group is a manufacturer of sewing thread and supplies, zippers and fasteners. Manager Anthony Cross, owner of the Liontrust Special Situations Fund, says: “The business supplies products to industries such as telecommunications, energy and automobiles.

“We are looking for intangible assets that provide barriers to competition. We believe that Coats owns them in the form of important intellectual property, in addition to an excellent distribution network.

“The company recently reported better-than-expected operations in the first quarter of 2021, which rebounded sharply from 2020 as it improved final market sentiment.”

1 Source: The unique attraction of Jupiter, of medium British capitalization.
2 Source: Supplier data sheet as of April 30, 2021.

Past performance is not a reliable guide to future performance. You may not recover the amount originally invested and your tax rules may change over time. Darius’ opinions are his and do not constitute financial advice.

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