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Premium content from Motley Fool UK Hidden Winners
Our monthly Best Buys Now are designed to highlight our team's three favorite and most timely buys from our growing list of small-cap recommendations, to help Fools build their stock portfolios.
#1 “Best Buys Now” Pick:
Polar Capital (LSE:POLR)
Why we like it: “polar capital (LSE: POLR) is a London-based fund management company that had £23.8 billion in assets under management (AuM) as of December 2024. While the investment management space often has a bad reputation, with the assumption that it charges high fees to the poor, Performance: We have no problem recommending asset managers with long-term dumb investment styles, and we think Polar's technology and healthcare approach is attractive.
“One of the attractions of fund management companies is that they have enormous operating leverage. Revenue typically grows at a rate proportional to assets under management, although costs remain roughly the same, so profits should grow at a faster rate. In good times, when markets rise and revenues increase, company profits should grow even faster, potentially making owning the business an indicator of market progress.”
Why we like it now: Over the last nine months, Polar Capital's assets under management have improved from £19.2bn to £23.8bn, an increase of 9%. The company has enjoyed modest net inflows of £200m and an increase of £1.8bn due to market and investment performance. This is a very credible result compared to other UK asset managers who have experienced capital outflows over the same period. Potentially, if Polar's investment biases (tech and healthcare) continue to drive strong performance, it should help attract more investors to its funds. Although the company's performance puts it at the top of its peer group, it trades at just under 10 times expected earnings, while a 9.5% forecast yield is worth considering for income investors .
“Best Buys Now” Pick #2:
Drafted
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