A strong or ‘on song’ growth story can all too easily allow investors to overlook risk or attach too much value to a powerful investment story that only drives a more moderate part of the total picture for future earnings. Conversely, a poisoned past can make one overlook the potential of a strong turnaround.
Three ‘growth’ stories
- Airtel Africa (AAF) – mobile data and in particular mobile money fintechs are experiencing explosive growth in Africa, an area that massively lags the rest of the world in terms of mobile communications and associated apps. So there are strong drivers at the core of this business, but micro and macro issues threaten to overshadow this making investment here higher-risk. The shares are on a low rating, but this reflects a balance of macro positives and risks.
- Genuit (GEN) – formerly Polypipe, this plastic products manufacturer is riding the wave from its environmental product adoption. While sales of such products have only been moderate historically, substantial change is afoot via acquisition and there is strong evidence that the quality of earnings here (historically tied to the lower quality UK construction cycle) is rapidly improving. While the investment story here is changing and improving the shares do appear to have run ahead too far, too fast. The recent slip back in the price may have further to go and that should present a better opportunity to buy into what looks to be a positive long-term story.
- Marks & Spencer (MKS) – Everyone (in the UK at least) must be aware of the problems suffered by M&S and investors have seen three-quarters of the equity value lost and an ignominious ejection from the FTSE100 index. Various attempts have been made in recent years to right the ship without success but, finally, real progress seems to be occurring – the board has brutally exposed the extent of the rot and has a credible plan. There looks to be untapped value here, but historic mistrust and the wholesale nature of the changes may result in a volatile share price in the short term.
