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The USA is the world's largest economy, and accounts of over half of the world's stock market valuation.
And American outperformance compared to Britain, for both economic and investment returns, is enormous:-
1. ECONOMIC OUTPERFORMANCE
"GDP Annual Growth Rate in the United States averaged 3.13 percent from 1948 until 2022"
https://tradingeconomics.com/united-states/gdp-growth-annual
"GDP Annual Growth Rate in the United Kingdom averaged 2.24 percent from 1956 until 2022"
https://tradingeconomics.com/united-kingdom/gdp-growth-annual
2. INVESTMENT OUTPERFORMANCE
From Hargreaves Lansdown "Investment Times", Issue 150 - autumn 2021:-
Calculated from the table on pages 4 - 5, Annual Performance Across The Major Sectors [rough non-compounded %s]:-
North America, average c. 16.9% p.a., 2011 - 2021
UK All Companies, average c. 9.8% p.a., 2011 - 2021
And the effect is heightened by year-on-year compounding over the long term:-
North America's 16.9% p.a. annual growth, compounded for 10 yrs., would compound $100K. into $477K.: a $377K. gain. on $100K.
• Britain's 9.8% p.a. annual growth, compounded for 10 yrs., would compound £100K. into £255K.: a £155K. gain. on £100K.
I.e. a ten year percentage return of well over double.
It's clearly to be expected that economic-business performance should mirror investment performance, because they are two sides of the same coin.
From Hargreaves Lansdown "Investment Times", Issue 154 - money guide 2023 - special edition:-
Page 26. "What Next For The US Stock Market?
... While 2022 saw US benchmark indices fall, with many names in the technology sector suffering dramatic falls, it generally still stands out as an incredibly resilient market to invest in. Whether this resilience is driven by the diversity of the economy, the flexibility of the employment market, or simply the nature of the American people is sometimes difficult to identify. ..."
America's 'macro' outperformance is naturally reflected in its 'micro' performance too.
Compared to Britain, American growth companies have a far bigger domestic market to expand into before they reach domestic saturation point.
This expansion is aided by the very dynamic, business-friendly nature of the country, its advanced adoption of new technologies, and its low energy costs.
And with their bigger domestic growth potential, they can achieve far bigger critical mass and economies of scale domestically, to assist in global expansion, and even domination.
That's why many of the world's largest companies are American, particularly tech-related.
Smaller suppliers-partners of top American growth companies can therefore enjoy huge and growing success for many years by aligning with them; early suppliers to McDonald's are good examples:-
"He promoted the slogan, “In business for yourself, but not by yourself.” His philosophy was based on the simple principle of a 3-legged stool: one leg was McDonald’s franchisees; the second, McDonald’s suppliers; and the third, McDonald’s employees. The stool was only as strong as the three legs that formed its foundation."
https://www.mcdonalds.com/us/en-us/about-us/our-history.html
Which brings to mind the American growth prospects of NWT:-
10 Sep 2021 7:00 am RNS Final Results
"... The future
However, the real step change for Grosvenor Technology could come in the US, where we will grow our business with existing partners and look to onboard new Tier 1 clients with a compelling offering that encompasses a combination of market-leading technology, products and services. ..."
https://www.investegate.co.uk/newmark-security-plc/rns/final-results/202109100700053342L/
This greater American growth potential is the basis of America's higher share ratings, with the differential being deserved on the basis of the greater business opportunity.
Arguably therefore, UK-listed growth companies with a large part of their business in America should also benefit from high share ratings, especially considering the relative scarcity value of such shares.
A re-rating for British successes 'across the pond' should therefore be expected as their story gets out, perhaps assisted by a dual-listing, or a subsidiary spin-out floatation in America.
Buying into such British successes can give great USA exposure without the foreign dealing costs and potential research etc. difficulty.
And if you can find one ahead of potential re-rating upwards, rather than paying higher American share prices, so much the better.
So with NWT subsidiary Grosvenor Technology poised to generate perhaps c. £18M. in revenue for its the year ending 30.4.23, with over half of that in the USA, this looks like an almost heaven-sent opportunity to obtain top American growth exposure at a bargain basement price.
Another advantage of US investment exposure for Brits (e.g. via NWT) is as a play on further weakening of sterling against the US dollar: and the long term trend for sterling in this 'pair' is strongly downwards.
For NWT, the strengthening US dollar, compared to sterling, means that:-
1. It becomes cheaper for NWT to sell to America.
2. The sterling value of NWT's US revenues is increased per dollar.
It also means that NWT becomes a cheaper takeover target for a US predator.
And the substantial business that NWT conducts in the US also increases the chance of a US takeover, in two ways:-
1. It brings NWT on the radar screens of more American peers.
2. It makes it more attractive to a US predator wishing to expand domestically.
In addition, if NWT subsidiary Grosvenor Technology is spun-out in a US floatation, a strengthened US dollar compared to sterling would increase the sterling value of these US-listed shares.
From Hargreaves Lansdown "Investment Times", Issue 156 - autumn 2023:-
"Why you shouldn't 'bet against Uncle Sam'
The data behind Buffet's wisdom on the American tailwind
Ziad Abou Gergi
HL US fund Manager
The biggest decision an investor must make is where to put their money.
When it comes to making that decision, Warren Buffert's annual letter to shareholders of Berkshire Hathaway from 2022 offers some sage wisdom.
In it the 'Oracle of Omaha', as Buffett is known, states "we count on the American tailwind, and although it has becalmed from time to time, its propelling force has always returned."
Buffett notes that in his 80 years of investing "I have yet to see a time when it made sense to make a long-term bet against America."
While Buffett's patriotism is admirable, does the data back up his conclusion?
US stocks are top of the hill
US stocks have consistently outperformed their global peers for decades.
Researchers at Arizona State University, Hong Kong Polytechnic University, and Tulane University looked at the performance of almost 64,000 individual global common stocks between January 1990 to December 2020.
The researchers measured how much shareholders saw their wealth (in US dollars) increase from holding a stock, instead of holding less risky assets like US treasury bills.
They calculated that, of the 63,785 companies that issued common stock in the January 1990 to December 2020 period, net global wealth creation was $75.7 trillion.
Interestingly, the wealth was highly concentrated in a handful of companies. Amazon, Microsoft, Apple, Alphabet and Tencent accounted for 10.3% of global net wealth creation in the same period.
Four out of five companies that created the most wealth were American. Added to this, 35 of the top 50 wealth creating companies in this analysis were also those based in the US.
Unsurprisingly, Apple ranked first, generating wealth of $2.67 trillion. Microsoft was also a top wealth creator over the sample period, to the tune of $1.91 trillion.
The analysis suggests that wealth created by investing in the stock market is largely attributable to only a handful of mostly US-based stocks. It also tells us that successful stock selection can help your performance as an investor.
Of course, hindsight is a perfect science. Back in 1990, no one could've predicted how large, global, and profitable Apple or Microsoft would become.
Individual stock selection is extremely hard to do. Perhaps a more useful interpretation of the results from this research is that the top global stock market performers over a 30-year period were predominantly from the US. And that it supports having a broad exposure to US shares as part of a well-balanced diversified portfolio. ..."
"Why you shouldn't 'bet against Uncle Sam'
... American stock market resilience
Interestingly, the sample period for this research includes episodes of social, economic, and political upheaval for the US.
Since 1990, the US has been engaged in armed conflict including the Gulf War and the war in Afghanistan. Its sovereign debt AAA rating was downgraded in 2011 and again in 2023 by two major credit ratings agencies.
There have also been four US government shutdowns. These happened in 1990, 1995-1996, 2013 and 2018. During the 2013 shutdown, Standard & Poor's, the credit rating agency, said that it had taken $24 billion out of the US economy.
This is only a small sample of the upheaval faced by the US in recent decades. However, US stocks have navigated these challenges well.
Born in the USA
So, why has the US been at the top of the shares leaderboard?
There are structural issues that give the US an advantage over other countries.
For example, seven US universities are in the top ten Times World University Rankings 2023, including Harvard, Stanford, & MIT. These institutions attract high-quality talent both domestically and from abroad, and this leads to high levels of innovation and economic dynamism.
The US stock markets are the biggest in the world and the US dollar dominates international finance as a funding and investing currency. In fact, the US dollar was involved in nearly 90% of global foreign exchange transactions in 2022, which makes it the single most traded currency in the foreign exchange market. Bottom line? It's hard to avoid the US when it comes to financial markets.
That said, while structural factors are important to traders, they're not the whole story. So too are fundamentals.
One way to measure how well a regional stock index is performing is to look at its return on equity (ROE). Return on equity is used to gauge both profitability and how efficiently the companies in the index generate their profits.
For the last 10 years, the US has consistently had a higher ROE than the UK and Europe.
This suggests the US Index has been better at converting equity into profits, and it's managed to do this on a consistent basis.
It's worth noting, European and UK indices have seen their ROE improve in recent years, while the US index's ROE has dipped. However, the US' ROE is still above its UK and European counterparts. ..."
Chart on page 24: "Comparative ROE for UK, US and European blue-chip indices." [%s 'estimated' from chart; extracts]
2012 - 2022
"US blue-chip ROE" C. 21% - c. 32.5%
"UK blue-chip ROE" C. 2% - 15%
"European blue-chip ROE" C. 5% - c. 12.75%
"Source: Bloomberg, 31/12/2022"
"Why you shouldn't 'bet against Uncle Sam'
... The future for US shares
The most potent argument to avoid US stocks and instead favour other global indices is 'mean reversion'. This is a financial theory that suggests asset prices and volatility will eventually revert to their long-term averages.
This mean reversion theory would suggest that US shares have enjoyed such a long period of outperformance that they're ripe for a sustained downturn. This would allow other indices to play catch up.
That could well happen. But, as long as the US is one of the world's biggest economies, companies based there could continue to prosper in the long term.
However, while the US is an important part of the global financial system, investors need a well-diversified portfolio that also includes regional diversification. This is the best way to shelter your portfolio against unexpected events. ..."
"HL US FUND
The United States of America makes up over half of the global stock market. Is it too big to ignore?"
"The Year Ahead: Human Capital Management Industry’s Projected Outlook Remains Bright
Spotlight Growth - Thu Dec 28, 2023
As 2023 winds down, many set aside time to reflect on the year that was, as well as the year ahead. The human capital management (HCM) industry continued to see elevated interest and importance from global businesses, as the labor and human resources (HR) landscape continued to trudge into a “new normal” in the post-pandemic climate. Whether ensuring proper payroll compliance for remote workers across various regions to attracting and retaining top-tier labor talent, HR teams have been juggling several issues throughout the year.
According to market research firms, those trends are likely to continue in 2024 and beyond. This bodes well for HCM service providers, who are projected to see their strong steady growth continue through the end of the decade. Let’s take a deeper dive into the HCM industry projections and one such company that stands to benefit from the continued demand for human capital solutions:
Research Firms: HCM Industry CAGR Estimated Between 7%-9% Starting In 2024
Several market research firms have already issued their HCM industry estimates for 2024 and beyond. While the specific estimates vary, the consensus continues to favor North America as the leading market for the HCM industry. However, the Asia Pacific market is expected to see high growth for HCM, as the region begins to adopt new technologies and policies. ...
Chief Human Resource Officers (CHROs) are stating their plans for 2024 to include continued development of employee experience, as well as investment in AI ...
Lastly, the survey points to an increased priority to utilize technologies, such as AI, to help automate more HR processes and functions. 61% of CHROs surveyed said they are investing in AI to streamline HR.
Taking a step back, the survey with CHROs across the United States appears to validate the growth estimate theses of the market research firms. Technological advancement for the goal of improving efficiencies and HR functions, combined with key employee retention are important factors for businesses heading into 2024.
Asure Software Stands To Benefit From These CHRO Priorities
Asure Software (NASDAQ: ASUR) is one such cloud-based human capital management service provider that stands to see continued benefits from overall growth in the industry. Throughout 2023, Asure has launched several new products and services specifically aimed at helping small and medium-sized businesses (SMBs) cut costs by streamlining operations, as well as improving employee retention and recruitment. ..."
https://www.theglobeandmail.com/investing/markets/stocks/AMZN-Q/pressreleases/22999650/22999650/
"The Year Ahead: Human Capital Management Industry’s Projected Outlook Remains Bright
... In partnership with companies like H&R Block (NYSE: HRB), Intuit (NASDAQ: INTU), Amazon’s (NASDAQ: AMZN) AWS, ZayZoon, Harbor Compliance, Lendio, and more, Asure has worked to deliver its SMB clients with a wide range of services across payroll & compliance, employee taxation, employee benefits & 401k, remote worker compliance & services, on-demand earned wage access, treasury compliance services, access to funding service providers and more.
During Asure’s recently-announced third-quarter financial results, the HCM provider reported a 34% y/y boost in revenues to $29.4 million. The company also beat its bottom-line estimates with an adjusted EBITDA of $6.2 million, which represented an improvement of $4.4 million in the third quarter of 2022. ..."
https://www.theglobeandmail.com/investing/markets/stocks/AMZN-Q/pressreleases/22999650/22999650/
The outlook for the HCM (human capital management) sector in America this year looks very bullish, and America is also the place to be for the best AI business growth.
So this 'Double-A' combination - America & AI - is a clearly very attractive one: and one to which NWT provides strong, profitable, and undervalued exposure.
Indeed Asure Software (NASDAQ: ASUR), which is singled out in the above article, is one of Grosvenor Technology's impressive range of software partners.
From NWT's Investor Meet Company presentation slides, 8th. February 2023:-
Slide 14:-
"Our customers are blue-chip organisations from across industry providing a solid UK base, with a growing presence through US software vendors.
... SOFTWARE VENDORS
protime
workforce software
Insperity HR that Makes a DifferenceTM
attendance ON DEMAND
MHR
ASSURE
UKG
access"
https://www.investormeetcompany.com/
NWT's US business model has proven to be hugely effective and efficient, and is now being rolled out worldwide:-
From NWT's Investor Meet Company presentation video, 8th. February 2023:-
21:00: " ... our growing base of software vendors. This is the focus of our planned growth activity. By leveraging many clients through each partnership, this avoids the need to mobilise a large direct sales force, and this is how we intend to grow the business. ... By focussing on HCM, particularly in the US where almost all of top twenty largest software houses are based, we are creating an exciting roadmap for accelerated growth. ... we are strengthening and expanding our existing partnerships with software vendors. ..."
https://www.investormeetcompany.com/
dab808 Posts: 204 Price: 48.50 Strong Buy
AGM (part 1) 31 Oct 2023 15:09
" ... We discussed the US business in more detail than ever before. We have 9 FTE based in the US. They are doing an amazing job and across HCM we are now working with 40 software vendors. These US staff is supported from the UK, this provides a very cost efficient way of working. As reported in the RNS today subscriptions are up significantly. As the software vendors are doing much of the business development, and we support from the UK in the background, we do not need to add significantly to the head count as we grow. We have a very scalable and low overhead operating model with reoccurring revenues. Not only is this growing rapidly in the US but we now have the rest of the world (reported as up 35% from a low base to scale on) again without adding much overhead. Given our growing presence in the US, Marie-Claire is out in the US in a few weeks time and will present to some US investors our business and model - exciting stuff. ..."
https://www.lse.co.uk/ShareChat.html?ShareTicker=NWT&share=Newmark-Security&page=4
dab808 Posts: 204 Price: 72.00 Strong Buy
RE: Real growth drivers 21 Dec 2023 12:11
" ... Will one of the biggest near term growth driver will come from the rollout of Primark stores in the US? 8 new stores this year and 60 by 2026, GT clocks etc should be added at each of these shops. There are 1,309 TJ Maxx stores in the United States as of December 05, 2023 ...
Just like when you explained the US model at the AGM -where we are super scalable and efficient. If the above is correct, it would be great if you could provide case studies (Primark or equivalent) at future investor updates. This will help that improve the understanding and make real for investors the opportunities, companies we support and how we will achieve the growth story. ..."
https://www.lse.co.uk/ShareChat.html?ShareTicker=NWT&share=Newmark-Security&view=message
D
23 December, 2023
"The valuation of this business has doubled on the back of a new strategy, but this is only a market cap rise from $4m to $8m. Yet revenues are at $25m and growing alongside profits that are set to escalate. The high margins on the US business started 5 years ago have seen revenues grow from $1m to $13m with profits around $3m. It is only the Safetell UK business being in decline throughout this period that has masked this fanastic growth opportunity. The UK business is growing again, this alongside the US business will deliver huge value in 24/25 and they are now roling out the US model worldwide. This small UK AIM listed business has a 10x bagging opportunity and this will become much clearer for wider investors in the next 18 months. You heard it here...."
https://finance.yahoo.com/news/newmark-security-plcs-lon-nwt-054612507.html?guccounter=1