Everything's still looking rosey...30 Oct 2013 14:06
Five high-growth stocks the market has overlooked
Three top-performing fund managers tip five stocks that retail investors may wish to consider buying before the rest of the market wakes up to their potential.
One way of generating better returns in your portfolio is to find high-quality companies that have been largely overlooked by the market.
Gervais Williams, manager of the CF Miton UK Multi Cap Income fund, says that retail investors often miss out because they tend to follow the crowd and only buy equities that already have a good deal of momentum behind them.
"There can be some great companies out there, but they don’t have momentum behind them, so they can be overlooked," he said.
In the next in our series of articles on how to become a better investor, we ask leading fund managers which stocks they are backing that have largely gone unnoticed by the rest of the market.
International Greetings Group
Williams’ first pick is the FTSE AIM-listed International Greetings Group. It is a business that designs, manufactures, imports and distributes gift packaging, stationery and creative play products.
"One company that comes to mind is International Greetings. It is an excellent company and though it does have a bit of debt, it is trading on just five times earnings," he said.
"They make things like wrapping paper, but it focuses on the value end of the market. They also make Tom Smith Crackers, which is a great business as we all buy crackers at Christmas."
"International Greetings is big in the UK, but it is also big in Europe and is growing in the US," Williams added.
Shares in International Greetings have been on a largely downward trend over the past three years. However, Williams says this means it is a great time to buy the stock.
"Its share price fell as a result of one of its Australian subsidiaries going into receivership through no fault of its own," he explained. "The effect of that meant the whole group was downgraded and that is why it is disgustingly cheap. The company is also seeing good growth again, which is encouraging."
It is Williams' largest holding in his CF Miton UK Smaller Companies fund, making up 6 per cent of his £10m portfolio. Elite Webb Capital Smaller Companies Income & Growth is the only other fund in the IMA universe to count it as a top-10 holding.
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