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Premium content from Motley Fool's Hidden Winners in the UK
Our Best Buys of the Month are designed to highlight our team's three favorite and most timely Buys from our growing list of small-cap stock recommendations, to help Fools build their stock portfolios.
“Best Buys of the Moment” Selection No. 1:
Polar Capital (LSE:POLR)
Because we like it: “Polar capital (LSE: POLR) is a London-based fund management firm with £19.2bn in assets under management (AuM) as of January 2024. While the investment management space often gets a bad rap, with the assumption that it charges high fees for poor performance, we have no problem recommending asset managers with long-term and Foolish investment styles, and we think Polar’s technology and healthcare approach is appealing. “One of the attractions of fund management firms is that they have massive operating leverage. Revenues typically grow at a rate proportional to assets under management, although costs are kept roughly the same, so profits should grow at a faster rate. In good times, when markets are rising and revenues are increasing, the firm’s profits should grow even faster, potentially making owning the business a bellwether for the market.”
Because we like it now: Polar Capital’s investment specialties are helping it grow assets under management at a faster pace than its peers. In its last fiscal year, the firm reported 14% AUM growth, benefiting from strong gains in technology stocks. Potentially, AUM should continue to rise as investors see its strategies deliver strong investment performance, potentially attracting more investors to its funds. While its technology focus has risks if the sector stumbles lower, the firm boasts a strong balance sheet flush with net cash, potentially making it a less risky way for investors to gain exposure to technology than investing in individual companies.
