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HL Select Global Growth Shares

Portfolio breakdown

Find out what we hold and why.

AccumulationIncome ?

Sell: 116.10p|Buy: 116.10p|Change -1.02p (-0.87%)

Correct as at 22/05/2020

Sell: 115.79p|Buy: 115.79p|Change -1.02p (-0.87%)

Correct as at 22/05/2020

Important information - The value of this fund can fall as well as rise so you could get back less than you invest. This information isn't personal advice and the information about individual companies represents our view as managers of the fund. It is not a personal recommendation to invest in a particular company. If you're not sure whether an investment is suitable for your circumstances please contact us for personal advice. The HL Select Global Growth Shares fund is managed by our sister company HL Fund Managers Ltd.

Country breakdown

Correct as at 18/5/2020

Sector breakdown

  • Software & Computer Services 27.0%
  • Industrial Support Services 10.1%
  • Medical Equipment & Services 8.4%
  • Media 8.0%
  • Other 6.8%
  • Investment Banking & Brokerage Services 5.3%
  • Beverages 4.5%
  • Managed-Funds 3.6%
  • Retailers 3.0%
  • Personal Care, Drug & Grocery Stores 2.9%
  • Non-life Insurance 2.9%
  • Finance & Credit Services 2.6%
  • Leisure Goods 2.4%
  • Cash 2.3%
  • Chemicals 2.3%
  • Technology Hardware & Equipment 2.0%
  • Electronic & Electrical Equipment 2.0%
  • Travel & Leisure 2.0%
  • Aerospace & Defence 1.8%

Correct as at 18/5/2020

Company size

  • <£50m0.0%
  • >£50m and <£250m0.0%
  • >£250m and <£1bn0.0%
  • >£1bn and <£3bn0.0%
  • >£3bn and <£5bn0.0%
  • >£5bn and <£10bn4.2%
  • >£10bn and <£20bn12.4%
  • >£20bn and <£50bn28.4%
  • >£50bn36.1%
  • Unknown10.4%
  • Cash and Equiv2.3%

Correct as at 18/5/2020

Full fund holdings

The portfolio shown is correct at 18/5/2020. Holdings may not show in certain circumstances, for example if we are building or reducing a position in a particular stock.

Company size


Offers a no-win, no-fee service for legal claims. Burford will assess the case’s merits and offer to finance it if they think it is likely to succeed, in return for a share of the proceeds.

Why we hold it

Assets come in many shapes and sizes. One of the more unusual varieties are law suits. In commercial law, there is typically a large sum of money at stake, with two or more parties claiming the right to it, for any number of reasons. It might be a patent infringement, a claim for breach of contract, or for damage caused to another party’s assets or wellbeing.

Companies can pursue these claims, if they see merit in doing so. But legal expenses are just that, expenses that must pass through the profit and loss account. So pursuing a claim for recovering what is due, means lowering profits in the near term. Quoted companies in particular, don’t like things that lower profits.

So along comes Burford, who essentially offer a no-win, no-fee service. They’ll assess the case’s merits and offer to finance it if they think it is likely to succeed, in return for a share of the proceeds.

Cases can take years and judges are not as predictable as one might wish. So Burford deal in uncertainties, but by having a large portfolio of cases on the go at once, a degree of smoothing is possible.

Historically, Burford has achieved great results. The company claim an average achieved return of around 30% p.a. from their portfolio. With cash generation from successful investments having been strong, Burford have substantially increased the portfolio of active cases, suggesting future income growth could be very attractive, if they maintain their track record of winning in court, or settling on the steps outside.

Burford have been busy in recent years. A merger with their largest rival brought greater scale and brought in a third party funds management arm. Their largest case, against Argentina, who allegedly expropriated an oil company worth billions of dollars a few years ago, has seen outside investors buy stakes in the lawsuit from Burford, at values that imply a huge uplift in value. Another case, again involving Argentina expropriating assets unlawfully has gone Burford’s way, once more generating a potentially large gain for Burford. Returns from large cases like these can be unpredictable. However Burford’s portfolio is well diversified so should not be overly reliant on any one case. We remain excited about the group’s long term prospects.


Professional publisher and data analytics expert, providing high quality technical information and networking to demanding users.

Why we hold it

Relx’s scientific, medical and technical journals, like The Lancet provide forums for top academics, clinicians and scientists to review the latest research, after peers have reviewed it to assure the quality of the work.

Relx’s Exhibitions division brings buyers and sellers from 43 industries together. Over 7 million people a year attend Relx Exhibition events, ranging from SinoCorrugated (not one for the casual visitor) to The London Book Fair.

Their Risk and Business Analytics division provides specialist information to insurers and others, helping them to understand the risks they face and to price their policies accordingly. In the legal business, LexisNexis has a suite of products ranging from practise management software to databases which enable lawyers to research their cases better.

Relx provides information and enables the exchange of information between professionals. No factories, no heavy machinery. Just capital-lite publishing and events activities that throw off cash at high margins, often from dominant global positions in Relx’s chosen niches.

Overall, we view RELX as a well-run business with very strong market positions, good growth prospects and defensive, recurring revenue streams. It is a higher quality business now compared to 5-10 years ago, given its reduced reliance on print and advertising and heavy investment in new products. We would expect it to be fairly resilient in an economic downturn, although remember there are no guarantees.


Global leader in alcoholic beverages with a collection of iconic brands, including Johnnie Walker, Smirnoff and Guinness. Its products are sold in more than 180 countries around the world.

Why we hold it

We like businesses that own strong brands, which keep their customers coming back again and again. In our view, Diageo falls firmly into this category. Brands like Johnnie Walker have immense aspirational appeal, not only in developed nations, but increasingly in developing regions, where demand is being supported by rising disposable incomes.

Turning water into wine (or spirits), and charging consumers a princely sum, earns the group huge margins, and means the business throws off cash. This has enabled Diageo to raise the dividend every year since at least 1999, not a reliable indicator of future income.

Despite its many strengths, Diageo’s progress had been relatively uninspiring up until recently, partly due to economic and currency pressures, but also, we suspect, due to weak execution. Recent management changes have resulted in improvements to the distribution model, more emphasis on volume growth and productivity – and increased focus on free cash flow. These changes are now bearing fruit, underpinning our confidence in the group’s ability to grow sales and profit margins, whilst continuing to return cash to shareholders.


LSE owns one of Europe’s oldest and largest stock exchanges. The group also provides information services and data on a subscription basis to its customers.

Why we hold it

LSE has completely transformed its business model over the last decade. 10 years ago, almost two-thirds of LSE’s revenues were generated by traditional exchange activities like trading and issuance of cash equities, fixed income and derivatives. These heavily cyclical activities now constitute less than one-fifth of LSE’s revenues.

Following a number of high quality bolt-on acquisitions, the bulk of LSE’s income is now generated from areas with strong growth potential and high barriers to entry. The clearing business is growing rapidly due to regulatory changes forcing over-the-counter (OTC) transactions in derivatives to be cleared by registered and regulated clearing houses. LSE’s index businesses are meanwhile benefitting from the structural growth in Exchange Traded Funds (ETFs) and benchmarking. This has driven strong growth in revenues and an expanding margin profile.

Outside of the Capital Markets division LSE benefits from strong pricing power and limited competition. Its business is capital light and throws off cash and the marginal cost of providing extra services is practically zero. Operating margins of approaching 50% combined with mid-teens returns on capital provide clear evidence of LSE’s strong market position.


LVMH stands for Moët Hennessy Louis Vuitton. While the initials may be mixed up, the group’s focus on luxury brands is not. It owns an unparalleled stable of labels stretching from Christian Dior to Givenchy, Tag Heuer to Bulgari, in categories from fashion through leather goods and into jewellery, fine champagnes and cognacs.

Why we hold it

LVMH dominates the luxury sector. The group has been built up over more than forty years by Bernard Arnault, whose family own just over half of the group. The business operates globally and many of its brands have over a century of tradition behind them. Fashion and Leather Goods are the biggest earner within the group.

Despite being the biggest player, LVMH has been outgrowing its smaller rivals and financially the group is strong. The virtuous circle of strong margins delivering buoyant cash flow to reinvest back into growing the business has been playing out well at LVMH and we think this can continue for some time to come.

We like the group’s strategy of controlling its own distribution globally for key brands. This allows it to keep control over where its brands are seen, vital to retaining cachet and maintaining price discipline.


Masimo is the leading provider of pulse oximetry technology, which allows medical professionals to monitor their patients’ blood oxygen levels accurately in real time.

Why we hold it

Masimo captured a big slice of the market in pulse oximetry from an industry giant by building a better mousetrap. Older generation technology produced erratic readings when patients moved, or had low blood pressure. Masimo found a better way to record blood oxygen levels, applying clever data processing to readings from the patient’s finger clip.

Low blood oxygen levels can be very dangerous, and medical staff need to intervene if patients’ levels fall too far. False alarms cause needless interventions, which can be expensive and distressing for the patient, whilst failure to signal a problem can lead to severe consequences.

Accurate, timely monitoring of oxygen levels improves patient outcomes and raises hospital efficiency. Masimo are so confident of their superiority that they have offered customers $1m if rival devices could be shown to have the same accuracy. With over a hundred research studies demonstrating Masimo’s superiority, they probably felt on safe ground doing so.

Masimo make their own equipment and also licence their technology to other medical equipment firms to incorporate into their own devices. That allows hospitals to use a single monitor per patient capable of logging data from many measuring devices, one of which is using Masimo technology. Through this piggy-backing, Masimo has been able to gain over 40% market share globally, generating high margin recurring royalty streams in the process.

Masimo’s growth is now also driven by extending usage beyond the intensive care unit and developing new conditions that can be monitored with Masimo technology. Newly launched products measuring oxygen levels in bodily organs and brain function are growing fast. Masimo have also signed a deal to put their latest technology into Philips monitors, and with the Dutch company having a high share globally this should accelerate the adoption of Masimo technology.

Masimo signs sensor contracts with customers and these contracts typically run for years. We value regular recurring revenue streams such as these very highly. We also note that the company’s renewal rate is close to 100%, suggesting that customers clearly also rate Masimo’s products very highly indeed. With net cash on the balance sheet, Masimo is in a strong position.


Coloplast is a Danish medical goods producer with leading global shares in the markets for ostomy and continence support products.

Why we hold it

Coloplast’s products provide vital support to patients worldwide with complex conditions that require exceptionally reliable performance. Ostomy bags and fittings, plus adult continence care are key markets. Coloplast also support mastectomy patients, provide wound healing solutions and skin care.

People suffering from the conditions that Coloplast seek to ease require absolute reliability. A failure to function properly can lead to distress and embarrassment for the patient. The group commits substantial funds to researching these conditions in partnership with professional caregivers and users.

Once doctors and patients have found a solution that works, they rarely switch providers and because the conditions that Coloplast addresses often last as long as the patient does, revenues tend to recur, year after year. The group is highly profitable, with profit margins around 30% and a balance sheet with little debt.

Revenues have grown from $100m to over $2,500m in the last thirty years, largely by organic means. Profits and profit margins have also grown substantially and shareholders have been rewarded with significant gains over the long term. We think the company’s relentless focus on quality and the rising prevalence of the conditions it serves amongst an ageing population position it well for more growth in the future.


Fisher & Paykel (F&P) are one of the world’s leading providers of respiratory support equipment in both the home and hospital environment. Based in New Zealand, the group operates worldwide.

Why we hold it

F&P have two key divisions, homecare and hospital care. In homecare they are the third largest player in the Sleep Apnea market, up against Respironics (part of Philips) and Resmed of the USA. Sleep Apnea is a dangerous condition that’s widely undiagnosed. Although a competitive market, it’s expected to grow strongly due to rising rates of diagnosis and because the condition is influenced by obesity, its incidence is likely to continue rising too.

The homecare division is around 40% of sales, with hospital care delivering almost 60% of the group’s revenues. Here F&P are the leading player in providing humidification support to patients in the intensive care unit. The company has developed a new respiratory support technique, branded Optiflow. This delivers humidified, oxygen-rich air deep into a patients lungs, without requiring invasive ventilation. By increasing the proportion of the patient’s lungs that are effectively oxygenated, these very poorly patients’ prognoses can be improved.

Years of funding clinical research into applications for Optiflow has led to a surge in evidence of the technique’s effectiveness and sales have been growing strongly. Fisher & Paykel’s products tend to consist of machinery that generates flows of humidified air and medical gases, plus the associated hoses and masks that connect the patients to the system. These parts are typically replaced with each new patient. This generates a strong flow of recurring revenues, which make up close to 90% of the total.

Optiflow has applications in the home too. Patients suffering from respiratory diseases like COPD (Chronic Obstructive Pulmonary Disease) can benefit from the higher levels of oxygenation delivered by Optiflow compared to traditional oxygen delivery techniques.

The group’s New Zealand base has not stopped it from creating a global presence. Manufacturing takes place in both New Zealand and Mexico and the end users of F&P equipment are overwhelmingly located outside of NZ. The balance sheet is sound, with the group aiming to be roughly debt-free from year to year. Growth, averaging around 14% in recent years, has been organic in nature.


Chr. Hansen was named the world’s most sustainable business during the 2019 World Economic Forum in Davos. It’s a leading bioscience business, producing enzymes, probiotics and yoghurt cultures for the dairy industry, and others, worldwide. Half of all cheese produced in the world uses a Chr. Hansen product.

Why we hold it

Originally a rennet producer (used to make cheese) in nineteenth century Denmark, the group has grown to be a major global bioscience company, generating over €1bn of revenue a year. Their largest market is in the dairy sector, where they make the enzyme cultures which help turn milk into yoghurts or cheeses. More recently they have expanded into probiotics and natural colours.

A pot of yoghurt will have only a minute volume of Hansen product within it, but that tiny quantity will have an enormous impact on how the product tastes and feels in the mouth. Their certified strains of bacteria allow customers to make probiotic foodstuffs that consumers can be confident only contain known, helpful strains of bacteria.

The group’s strengths in bacterial cultures are enabling it to address healthcare markets, creating strains that are designed to promote specific health benefits for both human and animal populations. Their technology can promote plant health, creating chemical-free agricultural solutions. In the food industry, there is an ongoing shift in favour of natural colours, at the expense of artificial.

The group’s sustainability credentials are undeniably strong. What they do tends to either enhance life and health, or improve environmental outcomes, by using natural bacteria to achieve results that would otherwise have been achieved via chemical use. And these benefits are driving demand growth for their products.

The company estimate that a billion people consume a Chr. Hansen product each and every day, and half of all cheese produced uses the group’s products. Because what they produce is critical to their customers’ product performance, but is only a small part of the finished item, their pricing power is strong. Profit margins are circa 30% and the group generates strong cash flows at very high (30%+) returns on capital. With revenues forecast to grow at high single digits Chr. Hansen looks like a reliable, high quality compounder.


Xylem’s is a water technology company which pumps, cleans and manages water throughout the water cycle. It’s a leading global manufacturer of the equipment and provides management and maintenance servicing.

Why we hold it

There’s growing awareness that we need to manage our world’s resources better, but there’s a long way to go. Water consumption has been doubling every 20 years, driven by population growth, increased urbanisation, aging infrastructure, and increasingly volatile weather. The temperate UK climate means water issues aren’t as acute as in hotter, dryer parts of the world but it’s an increasing issue almost everywhere.

Xylem’s strap line, ‘Let’s solve water,’ encapsulates its mission. It provides products and services to a number of different customers to help manage and conserve water.

Roughly half of Xylem’s customers are public bodies or utility companies, and many of its contracts run for years meaning around half of revenue recurs year-in, year-out. This reduces Xylem’s economic sensitivity.

Water infrastructure accounts for around two-fifths of sales, where Xylem works to replace aging water systems in developed countries, and new structures in emerging countries. Approximately a third of the business is aimed at providing technologies to manage water economically, with around a quarter focused on measuring and controlling water in the system through quality testing, metering and analysing the performance of water infrastructure.

We like Xylem’s business model, with its reputation for quality, long-term contracts, and exposure to steady clients, and think it’ll make a good holding for the fund.


CAE is a Canadian company that produces aircraft simulators and provides pilot training services both in the simulator and live flying environments.

Why we hold it

The growth of emerging nations, especially in south-east Asia is generating rising demand for air travel. Aviation is a highly regulated industry and one of its most basic regulations is the requirement for formal pilot training.

Boeing and Airbus have enormous backlogs that will see the volume of jet airliners produced rise substantially in the years ahead and more planes means more pilots. If the airlines want to use the planes they have ordered, they need to have sufficient pilots to keep them aloft. Incidents like the tragic Boeing 737Max software glitch in 2018 only add to demand in the long term as pilots must be trained in any new systems that result. The rise of low cost airlines around the world is a positive for CAE. New start-ups don’t have their own training fleets so are likely to look for an outsourced training solution.

Pilots are getting older. The aviation sector was badly hit by 9/11 and now faces a shortage of First Officers to replace their retiring Captains. This is expected to oblige the industry to push junior pilots through training at an increasing pace. Adding further pressure the US government raised the training requirements a decade ago, obliging new pilots to have a minimum of 1500 hours experience. The coming growth in aircraft numbers could well understate the future demand for training services.

CAE are increasingly a training provider, rather than just the manufacturer of the simulators. They serve the civil airlines, business jet operators and defence forces globally. Training contracts tend to last for years and create recurring revenues for the group. As the proportion of revenues derived from training rise we expect to see profit margins and returns on capital increase.

CAE’s competitors are often the aircraft manufacturers themselves, but CAE can offer training across multiple manufacturers’ airframes. In business aviation customers very rarely have their own simulator facilities. In the defence markets, armed forces typically want to own the kit themselves, and so will buy a simulator outright and then either provide their own trainers or outsource to CAE or a rival.

CAE Inc seems well placed to benefit from these structural demand-drivers and its market position is protected by substantial intellectual property and know-how. CAE’s moat is its IP, reputation and its scale. Without scale, a new entrant cannot manufacture economically, creating a chicken-and-egg situation that works in CAE’s favour.


Raytheon is a leading US defence company, with products ranging from Patriot missile defence systems to cybersecurity services.

Why we hold it

The US Department of Defence is the largest buyer of defence equipment in the world and Raytheon is one of a small handful of prime suppliers to the US military. Demand is determined by the level of perceived threat and the US Government’s willingness to invest in capability.

Raytheon has a long track record of delivering sustainable returns through developing world-leading technologies. Their particular specialism has been missile defence, where Patriot systems have long set the standard.

Over the last thirty years or so, revenues have grown from under $5bn per annum to more than $20bn and earnings per share have risen a little faster. The group makes double digit profit margins and carries little debt. Defence equipment programmes tend to run for long periods of time, with ongoing investment into upgrading the capabilities as threats evolve.

The customer, typically the US DoD, pays defence companies to research technologies and then to convert research into products before finally commissioning the product itself. This de-risks the process for the defence company, although once in production they must manage their costs against the price agreed with the DoD.

Raytheon’s strength in missile technology leaves it well placed to benefit from the growing use of Unmanned Aerial Vehicles. Revenue forecasts have risen strongly in recent years as the company has capitalised on the opportunities available.

In an increasingly uncertain world, the level of defence spending is unlikely to fall any time soon. Raytheon’s track record of growth, exposure to high-demand categories and strong financial position puts it in a good position, we believe. With a large base of recurring revenues already in situ, new contracts should be strongly accretive to growth.


Linde is the largest producer of industrial gases in the world, used in a range of industries from the production of beer to welding.

Why we hold it

The industrial gas industry supplies multiple products that are used across a wide range of industries. Applications include the production of beer, cutting and welding, or providing pure environments for research laboratories. The method of production involves separating the components of normal air, and hence the raw material is free. This is unlike most industrial chemicals companies, where the cost of raw materials is usually the driver of profitability.

Linde’s products are distributed to customers via three methods: on-site, merchant and packaged. If a customer requires a significant volume of gas every day, then Linde will build a large air separation unit on their site. Linde will then sell any excess capacity from this site to other customers via tanker trucks (merchant) or packaged cylinders. Due to the large capital expenditure required to build an on-site facility, these customers sign long-term contracts with Linde (typically 10-20 years), and this reduces the cyclicality of this part of the business.

Industrial gases typically make up a small fraction of a customers’ overall production costs but they are a vital input to ensure operations continue uninterrupted. For this reason, customers are willing to pay up for Linde’s products and they are also unlikely to switch suppliers.

Linde has recently undergone a merger with Praxair, the third largest industrial gases company in the world. We view this as a positive move as the combined entity is likely to benefit from significant cost synergies. Additionally, Praxair has historically earned industry-leading operating margins and returns on invested capital. With the old Praxair CEO taking the helm of Linde, some of these strategies could be applied to Linde’s operating base.


Moody’s is the world’s second largest credit ratings agency. Moody’s provide ratings services to corporate borrowers, alongside risk management, software and data solutions for investors and insurers.

Why we hold it

Moody’s and its main rival, Standard & Poors, control around 70% of the global market for credit rating services. The industry is a natural oligopoly – investors do not trust ratings provided by unknown analysts, so companies looking to attain a rating for their debts naturally turn to the big names in the industry.

Bank lending appetites are lower than before the financial crisis, and debt markets have evolved, with more borrowers issuing bonds. Their banks act as arrangers and distributors of the bonds, rather than lending clients the money themselves. This is great for Moody’s since more bonds being issued means more ratings to be paid for and more retainers for ongoing coverage of those bonds.

The group has two divisions, Moody’s Investor Services, which is the credit ratings business, and Moody’s Analytics, the training, risk management and data services division. Over 80% of profits come from the Investor Services division. Revenue growth is driven by Moody’s market share, the amount of debt raised, the proportion raised in the form of bonds and price increases. Widening the range of borrowers who get their debts rated can also add to growth.

A strong credit rating typically cuts the interest rate that the borrower has to pay by more than the cost of obtaining the rating as it widens the pool of investors that will consider the bond. This gives the group pricing power – their profit margins are around 40%. The initial service of rating a bond is a one-off revenue, retainers then generate recurring revenues. In the Analytics division, many of the services are sold as subscriptions, further lifting recurring revenue.

Moody’s generates strong free cash flows, after all they have little need to spend money on capital investment. So profits are largely available for either paying back to shareholders, repaying borrowings or funding acquisitions of complementary businesses.

With the cost of borrowing looking likely to stay in a low range for some time to come and the significant refinancing needs of existing debt, the conditions for bond issuance look favourable. We think Moody’s market position leaves it very well placed to prosper and expect the business to generate reliable growth in revenues and earnings for some time to come.


Accenture is a leading global provider of management consulting and technology services.

Why we hold it

We’re in the midst of a technology revolution that’s disrupting and transforming businesses and entire industries around the world. Accenture is regarded as a leader in IT services and works with clients to help them navigate the changing tech landscape.

Accenture collaborates closely with its clients in order to improve their efficiency, value and growth prospects. They have a presence in over 40 countries worldwide, where their clients include 94 of the largest 100 companies in the world and over 80% of the largest 500.

And they have a good habit of making themselves indispensable to their clients, demonstrated by the fact that 97 of their top 100 clients have been working with them for over a decade.

By working with the world’s largest and most progressive companies, Accenture can gain early insight into new challenges facing businesses, as well as the leading-edge technologies they are deploying. This allows them to stay ahead of the curve, keeping the firm’s offerings highly relevant in today’s fast-paced world.

All this means Accenture is something of a cash machine, and has converted more than its net income into free cash flow each year for the last 5 years. This cash helps fuel both organic and acquisitive investment in the business, as well as a healthy dividend and share buyback policy.

Total shareholder return (both share price appreciation and dividends) has grown on average 15% per year since 2001. Although this is not a prediction of future performance.


Booking is the world’s leading provider of online travel and related services. Brands include,,,, and OpenTable.

Why we hold it

Booking Holdings is a classic example of a technology disrupter. You don’t need to go to a travel agent anymore, all you need is internet access to research, compare and book your next holiday.

Booking’s brands operate in over 220 countries worldwide and host over 5 million hotels and other accommodations on their sites, representing some 30 million rooms in total. The sheer volume of options generates increasing website and app visits, which in turn leads to the supply of more places to stay, and so on.

This virtuous cycle creates a valuable network effect. Booking is set to continue to benefit from this network effect thanks to its position as market leader and the one way shift of travel bookings from travel agents to websites, now to mobile. is the jewel in the company’s online crown and is a top-10 travel app in 117 markets around the world. The firm’s strong presence in China presents a great opportunity for future growth as the Asia-Pacific region is predicted to represent nearly half of total industry online booking growth over the next 5 years.

Booking’s financial health is extremely sound, despite recently increasing its leverage. Total debt at the end of 2018 stood at £8.65bn, but the company’s profits are enough to pay the interest on the debt 21 times over - so nothing to worry about here, in our view. There is also £2.6bn cash on the balance sheet. The firm currently doesn’t pay a dividend but does buy back shares with the billions of pounds it generates every year.


ServiceNow is a subscription software company which provides cloud solutions to help manage and automate various business functions. Products span IT service management, HR, security and customer service.

Why we hold it

ServiceNow began by spotting an opportunity to disrupt the IT service management industry with the use of ‘cloud’ based technology. Their product, a ticketing tool that tracks companies’ IT issues, wasn’t new, but the way they delivered it was. While the competition offered solutions which had to be installed in offices, ServiceNow used the cloud to deliver the product faster, cheaper and easier. Their winning formula quickly bumped them up to market leader in IT service management.

Following this initial success, the company expanded into other fields, including IT operations management, which allows managers to monitor, control and track the health of their firm’s IT systems, and HR service management, which provides a centralised system for quick and easy access to HR services like payroll, benefits and recruitment.

Offering these extra solutions to customers after they’ve adopted ServiceNow’s IT service management product has provided ample upsell and cross-sell opportunities for the company. Today, roughly three quarters of all customers use more than one of ServiceNow’s products.

By their nature, these products quickly become integral to the inner workings of a business, making it difficult, costly and risky to swap to another competitor. Customers are ‘sticky’ to ServiceNow and they boast best-in-class customer retention of 98%.

All this feeds into ServiceNow’s financials. The business is highly cash generative and its revenue is high quality because customers are signed up on subscriptions, which deliver income year after year. However, as a young business it’s had to spend a considerable amount on establishing a footprint in its industry to win confidence and customers. So far, that’s meant it’s spent more than it’s earned, but we expect that to change in the coming year, as their marketing efforts bear fruit.


Charles Schwab is one of the largest banking and brokerage firms in the United States. It offers an extensive array of products and services including mutual funds, Exchange-Traded Funds and financial advice.

Why we hold it

Charles Schwab is an industry leading financial services provider that has a culture of putting its clients first. And we love that. This has contributed to its impressive scale and today the company services over 14.5 million customer accounts and has approximately $3.5 trillion assets under administration.

Schwab’s sheer scale gives it a cost advantage versus its rivals. It also benefits from a low cost of funding in its banking arm, with much of the banking arm’s funds provided by depositors. Its lending activities have a relatively low risk profile, often collateralised by the securities held by the borrowers in their Schwab accounts. Even in the depths of the financial crisis, Schwab’s credit quality remained high.

Schwab operates in a constantly changing industry, not only from a technology perspective but also products and regulation, however they are one of the few companies that can keep pace and make new offerings in a timely and profitable manner. For example digital advice and exchange-traded products.

The company has a long, impressive track record and both revenue and net income have compounded strongly over 25 years. Over the same time period the company has also paid out a stable or increasing dividend every year to date. With the retirement gap, the difference between what has been saved for retirement versus what is needed, looming over most of the developed world, the long term outlook for savings and investment demand is positive for a business like Schwab.

Founder Mr Charles Schwab retired from the Chief Executive Officer position in 2008 but remains the company’s Chairman and the largest shareholder.


Shiseido is one of the oldest cosmetic companies in the world, founded in 1872 in Tokyo, Japan. Shiseido’s portfolio is made up of products spanning high-end beauty, skincare, makeup and personal care.

Why we hold it

Companies, like Shiseido, which sell high-end beauty products are able to command substantial pricing power because customers want proven formulas and a trustworthy brand. Their products also drive buyers to shops, leading to strong relationships with retailers, adding yet more support to the value of their brand and pricing power they hold.

But while most of their products are still sold in department and speciality stores, digital channels are becoming a more important part of the industry. Particularly for brand discovery, think adverts to youngsters on Instagram, and engagement during and after purchase, for example how-to-videos and personalised recommendations on YouTube.

So we’re pleased to see Shiseido investing in these digital capabilities, having recently acquired MatchCo, which offers customised make-up via smartphone app and Giaran, an artificial intelligence technology.

Financially, we’re also pleased to see the business executing their strategy well. In 2014, they launched ‘Vision 2020’ under new CEO Masahiko Uotani. The focus was on consolidating Shiseido’s portfolio of brands, enhancing its prestige brands, and bringing what they term next generation cosmetic products to market. So far, the strategy is going well, with the company hitting its Y1bn revenue target 3 years earlier than expected.

Description is the largest online car sales business in Australia.

Why we hold it

Historically, car advertising was done in regional print magazines or newspapers. Buyers would have to independently research differences between cars, contact individual sellers separately, and then physically travel to the car to see more than a small grainy image. It was a lengthy process and all too often, a poor experience.

The internet brought online marketplaces that could consolidate cars for sale in one place, supply photos with adverts and give consistent information on cars for comparison purposes. The greater choice and experience attracted buyers, and as buyer numbers grew this attracted more sellers. This virtuous circle benefited the first movers, like, which now holds a dominant position in the Australian market.

As well as taking a small cut from car sales initiated via their website, Carsales also makes money by providing extra services. For example, they harness the data from their website and use it to help dealers manage inventory and improve profitability, for a fee. These value added services represent the greatest growth opportunity in their home market of Australia.

Carsales has also expanded overseas, providing opportunity for higher growth from faster growing economies. Brazil and South Korea are the largest and highest quality opportunities at the moment.

With the business being wholly online, Carsales has little need for capital expenditure. Instead they spend their money on IT staff and software, most of which is expensed day to day, so profits mostly turn into cash flow as the company grows.


Amphenol designs, manufactures and sells electrical and fibre optic connectors and cables.

Why we hold it

Electric vehicles, 5G mobile technology, the Internet of Things and industrial automation are just some of the industries where you’ll find Amphenol’s connectors and cables. And, while the winner in each of these areas is yet to be decided, Amphenol bears little risk to how it all plays out over the coming years because almost all of the businesses vying to win use their products.

As connectors are an integral part of the finished good, but make up only a fraction of the cost, customers apply little pricing pressure to Amphenol and focus more on their reputation, quality and consistency. Additionally, once connectors are designed into large systems it’s very challenging for manufacturers to switch.

Amphenol has been partly built through acquisitions and runs a decentralised operating structure, essentially meaning acquired businesses are left to their own devices with their own general managers, profit and loss accounts and corporate functions. This has created a more entrepreneurial and agile business culture, which helps provide shelter in a downturn.


Adobe is a multinational computer software company, focused in the areas of multimedia, creativity and digital marketing.

Why we hold it

Adobe is the number one choice in all its markets and its strong market positions are supported by brand reputation and technical know-how.

Creative software was one of the business’s original focuses and these products have now become the gold standard in areas such as graphic design, web development and photography. One of its well-known applications has even evolved into a commonly used verb – to photoshop.

Over time, and with the help of acquisitions, Adobe has also built up what they call the ‘experience cloud’. This offers products and tools that allow customers to build personalised marketing campaigns. These products are tied directly to customers’ revenue-generation, meaning they’re hugely valuable, raising the barrier for any customer to switch away from Adobe.

Adobe has transitioned from a one-time purchase business model, where their products are just installed onto customers’ computers from a disc, to a cloud-based subscription model – effectively renting its product to its clients. This shift has created recurring revenues, reduced cyclicality and ultimately expanded operating margins. It also serves to curb piracy concerns.

Finally, and importantly, unlike many of its cloud-based software competitors, Adobe is robustly profitable thanks to the maturity of its creative software offerings. Financially the business is in a strong position, with net cash on its balance sheet.


Alphabet is an internet technology giant, and is the holding company of brands such as Google, Android and YouTube.

Why we hold it

Sellotape, Astroturf, Frisbee, Biro, Tupperware, Cashpoint – all brands that are synonymous with a product. Google may have surpassed them all though, by becoming a verb: to Google. This is the kind of brand strength we like, but the business has a number of other great branded products, such as Android, Chrome, Google Maps and YouTube.

Google accounts for 99.5% of Alphabet’s sales, and within the Google business, 88% of revenues are made from advertising in one form or another.

For example, companies pay Google to appear at the top of the search page. The coveted top 5 links on the first page of search results receive nearly 70% of clicks, with the next 5 trailing far behind, receiving less than 5%. Google search success is clearly vital to the success of some companies, so not paying up to Google isn’t an option. With every search and click made, Google learns more and more, improving its search results and improving it’s already market-leading position.

The bulk of Google’s remaining business is Google Play (its media store), cloud computing and hardware (e.g. mobile phones and smart home devices). These are all growing strongly and help reinforce the company’s network effect.

Outside of Google, the remaining 0.5% of Alphabet’s sales is made up of ‘other bets’ – yep, that’s literally what it calls them. This includes businesses that might make a huge impact in the future, such as Waymo, their self-driving car project. With Alphabet’s sheer scale, and net cash on the balance sheet, it can continue to invest in its core business as well as these ‘other bets’ without significant impact to its financial position.

Description is an American technology company that focusses on e-commerce, cloud computing and artificial intelligence.

Why we hold it

Amazon’s disruption of the retail industry is well documented, but aside from the well-known e-commerce platform, the company continues to find ways to evolve its business model further afield.

A major advantage for Amazon is its distribution capabilities, which satisfies consumer demand for quick and cheap (often free) delivery. Within its online shop Amazon also benefits from a strong network effect as its competitive pricing and breadth of products attracts millions of customers, which in turn attracts more merchants. And the virtuous cycle continues.

Amazon is also developing a hardware/software ecosystem (e.g. Kindle, Echo, Fire TV stick). These items help generate additional subscribers for its Prime memberships, improve engagement levels and create a positive halo effect on general merchandise sales.

Unbeknown to most, Amazon also has a massive (and hugely profitable) cloud computing offering in Amazon Web Services (AWS). AWS is a secure cloud computing platform, offering flexible computing power, information storage, content delivery and other functionality.

AWS is one of the largest suppliers of cloud computing and possesses more than 3 times the computing capacity than the next 10 largest providers combined. Businesses will continue to look to cloud providers in order to help them scale and grow whilst managing their information technology expenditures, and Amazon is becoming a preferred name for this.


Microsoft provides software solutions to businesses, including Office, Windows products and cloud computing services. They also own LinkedIn and Xbox.

Why we hold it

Since the appointment of CEO Satya Nadella in 2014, Microsoft has reinvented itself. It’s shifted products such as Microsoft Office from a one-off model (buy the disc and install it) to a subscription model (download the software and pay regularly).

This has led to more predictable revenue streams and has improved operating margins in recent years. These products, like Excel, are usually critical to business processes and it’s almost unthinkable for any company to replace them with something else.

Microsoft has also emerged as a cloud leader, becoming one of the two largest providers who can deliver a wide variety of solutions to other firms at scale. The other being Amazon. Microsoft Azure, its cloud platform, offers flexible computing power, database storage and other functionality to customers.

As many enterprises already have a strong Microsoft presence in their IT systems, this foothold can help make a transition to the cloud much easier as everything remains in the same Microsoft environment.

Across Microsoft’s many products and services, including LinkedIn and its gaming segment, the company benefits from a network effect, whereby the vast and increasing number of users across the globe increases the value of the offering itself.

Much of what Microsoft is doing now is aimed at providing an integrated one-stop-shop for a business’ IT needs, which is only going to become more valuable given the technological transformation happening in businesses throughout the world today.


Ubisoft is the developer behind the Assassin’s Creed franchise of video games.

Why we hold it

Once a gamer, always a gamer. Well, sort of. If you’ve grown up playing video games, there’s a good chance you’ll play throughout your life. This, plus growth in emerging markets, means video gaming is set to be the largest and fastest growing segment in entertainment.

The bulk of Ubisoft’s business is focused on PC and console games, which are attractive areas for investment, in our view. Technology is also allowing Ubisoft to generate higher quality revenues, using downloads to sell games without a physical disc and increasing recurring revenues from subscriptions and in-game purchases.

The dawn of increased connectivity between gamers has made network effects much more important because gamers swarm to a smaller number of games so they can play with or against each other. This means smash hits, while still relevant, are much rarer. The market is much more driven by the success of renewing and developing the latest iteration of a franchise. We like that because it reduces risk and revenue volatility.

Combined with the staggering cost of developing a modern game, this has led to a dramatic decline in the number of gaming companies over the last decade. With franchise ownership and know-how held in increasingly concentrated hands, the competitive positions of the companies that remain has been strengthened dramatically.

We think these changes will continue to improve the quality of the business. In the future, we can see further upside from streaming and eSports, but the potential we see today is enough to warrant Ubisoft’s position in the fund.


Tencent is one of the world’s largest technology companies and a behemoth of online activity in China.

Why we hold it

Tencent dominates much of online life in China. While comparisons across borders are often simplistic, it’s fair to say Tencent is China’s Facebook, WhatsApp, Netflix, Spotify, and PayPal all rolled into one. Its WeChat social and shopping network is the most visited app in China with over 80% of the population using it every month. It also has a leading position in Chinese gaming.

Tencent’s scale and dominance give it the kind of competitive strength we like, because all this functionality on one platform is an extremely powerful proposition for both consumers and advertisers. Visitors drive more content which drives more visitors – a virtuous circle, which is evident in gaming too. Its success attracts players, which in turn attract the best ideas from developers, which lead to more players and so on. You get the picture.

Much of the revenue generated from Tencent’s social/shopping networks and gaming activities are generated through subscriptions and in-app purchases, but advertising plays a part too. However, Tencent displays adverts much more sparingly than many similar platforms, giving it greater room for growth without impacting the user’s experience.

Tencent does have a few other interests. It has entered the cloud computing arena, effectively leasing computing power to those who prefer to rent rather than buy, and has a number of investments in companies such as electric vehicles, car hailing, a digital literature library amongst others. At the moment none of these ventures is big enough to make a material impact on the company, but they could hold promise for the future.

Tencent has been a fantastic performer over recent years, which is not a guide to the future, but given its strong market positions and exposure to the Chinese economy, whose growth rate continues to outstrip most developed markets, we think it will remain an appealing investment for some time to come.


Philips has sold many of the businesses that once made it a diversified conglomerate. It’s now a focused health technology business, positioned to benefit from the shift towards data driven and connected care.

Why we hold it

Philips is over a century old, with a deep heritage and a history of innovation. It has many of the attributes we look for when choosing quality companies to invest in. Its competitive position is reinforced by strong market positions and cutting edge technology, which make switching costs high and mean customers keep coming back.

Increasingly, when patients visit a hospital, technology is involved. Not only does Philips have some great medical technology, but it’s focused on areas that make a huge difference to both patients and doctors – like imaging for both diagnostics and treatment, and digital and connected healthcare information systems. While this equipment doesn’t come cheap, it can actually reduce overall costs for hospitals.

Philips also sell respirators, grooming, skin and oral care and other products to consumers. The company has leading brands in these areas, which add useful profits, but, if it were to streamline its business further and focus exclusively on medical technology at some stage in the future, we think it could be positive for the share price.


DiaSorin is a global leader in testing blood and tissue samples to diagnose illnesses.

Why we hold it

DiaSorin’s tests punch well above their weight. They’re relatively inexpensive but help doctors make important decisions as to how they’ll treat their patients.

In total DiaSorin has over 100 different tests, which generate a meaningful revenue stream of a few hundred million dollars. While that seems like a lot of money, it’s not enough to warrant too much competition from the bigger players in the sector. Plus, there’s a lot of technology and know-how which protects DiaSorin from potential rivals.

The firm provides equipment to laboratories and signs them up in a long-term contract to buy the compounds needed for each test. This creates a flow of small, yet recurring revenues, which we like.

Add the large pile of cash that the company holds, which ought to shelter it during any downturns, and a management team with a large shareholding to align their interests with ours, and we think DiaSorin could make a great contribution to the fund.


PayPal is a digital wallet supplier and helps firms process payments online.

Why we hold it

Most of you will have seen the PayPal button when buying that holiday, new pair of jeans or doing the weekly food shop online. But if you’ve ever used PayPal, you’ll appreciate the benefits: simplicity (one password to access your differing payment options), and security (your card details aren’t shared with the website you’re using, and your purchase is likely to be insured against loss or damage).

This, however, is only part of the equation. Companies like PayPal because customers are significantly more likely to complete their checkout if PayPal is an available option.

The number of PayPal customers, both businesses and consumers, has continued to grow strongly, supporting a network effect that strengthens its competitive position.

PayPal is also the engine behind payment processing at many other websites, where you won’t see its logo. It also owns iZettle, the offline payments system you might have seen in shops, and Venmo, the social payments system that’s proving popular with American millennials, in particular.

Another reason we like PayPal is we believe it has defended its leading position through many tech and industry changes, and has remained at the forefront of development. As an example of what they’re doing to try and future proof the business at the moment, PayPal are increasingly focused on value-added services and becoming a solutions company rather than simply a button on a website checkout page, e.g. helping merchants identify high-value prospects and turn them into buyers.

We don’t know exactly how the payments system will evolve over the next 10 years, but we believe PayPal can stay at the front of the pack. And given ecommerce is still only a small fraction of global retail, we expect this area of the economy to have the wind behind it for some time to come.


ANSYS are specialists in developing software, which simulates real world objects – a really useful thing for firms that need to design and test complex products.

Why we hold it

ANSYS helps firms make all sorts of products. Examples include medical devices, smartphones, cars, planes and even architectural structures. It does this by providing software that can tell designers and engineers how a design is likely to work in real-life.

A great example is crash testing of cars. For a carmaker to build a prototype and crash it into a wall costs lots of money, and only gives the carmaker information about impact at one speed, one set of tyres, one set of road conditions and against one type of object etc.

By using ANSYS’s software to simulate a crash the carmaker can repeat the experiment at different speeds, weather conditions etc over and over, making changes to the design as it goes to improve the results and all the time checking other factors, such as aerodynamics in a virtual wind tunnel.

This can help the carmaker produce a better car at a lower cost and in a shorter time period, which counts for a lot. And as a bonus, it improves the environmental footprint of testing too.

Products are becoming more complex as technology and data expand the boundaries of what’s possible. This trend, the benefits of using ANSYS’ services earlier in the design process, and for predicting maintenance of costly machines, should see simulation become more widespread.

ANSYS has world-class technologies, and is embedded in a broad spread of customers’ research and development departments. We think this makes the revenue stream high quality and, combined with good profitability and a strong balance sheet, the future looks bright to us.


Align is the world’s leading supplier of clear aligners, an increasingly popular alternative to traditional teeth braces.

Why we hold it

As populations become better off, more and more money is being spent on physical appearance. The other large influence we can’t ignore is the pervasiveness of the cameras on smartphones.

In years gone by, straightening wonky teeth invariably meant getting braces of the metal brackets and wires variety. These often required regularly adjustment by a dentist or orthodontist, and it’s probably not an understatement to say that patients didn’t relish the ‘metal mouth’ appearance of this traditional treatment.

Back in the late 1990’s a start-up called Align Technologies was formed by a handful of entrepreneurs to develop a more palatable (pun intended!) alternative using modern technology.

Align now runs one of the world’s largest 3D printing operations making clear aligners under the Invisalign brand which has become synonymous with the method. Clear aligners appeal for a number of reasons – an improved appearance and greater comfort, plus they can be removed for eating, sport or that all important business meeting or date. And fewer visits to the dentist are generally required.

Align uses proprietary technology in design, materials, and manufacturing to make its aligners a favourite with dentists and orthodontists in over 100 countries, and Invisalign’s aligners have been used by millions of patients since its launch. Despite the huge progress so far, we think the company has great prospects given the potential opportunity is many multiples of current sales.


Mastercard manages a network that facilitates payment between two parties. Banks that issue credit cards use Mastercard’s network to connect to the retailer’s bank so payment can be made.

Why we hold it

How much cash do you carry when you leave the home? Chances are it’s much less than it was a decade ago. And, how much shopping do you do online? Probably more than you did. The volume of money spent online, including items from abroad, has grown dramatically and doesn’t look set to slow down. These factors are the driving force behind the growth in electronic payments.

Mastercard owns a very valuable network. The more shops that accept Mastercard, the more shoppers will use it, and the more shops will accept it – a virtuous circle. Using Mastercard provides buyers and sellers with a very valuable service at a surprisingly low price.

You won’t be surprised to hear that there’s a data story here too. Knowledge of shoppers’ spending habits is hugely valuable to retailers and Mastercard is increasingly helping them take advantage of it.

Obviously, competition exists, mainly from Visa and Amex, but we think the market is big enough for all to flourish. In particular, we think Mastercard’s sturdy balance sheet, great profitability, plus the capacity to make great returns from new customers with minimal extra investment are a real boon.


West Pharmaceuticals is the world’s largest manufacturer of elastomer components (the rubber end on an injectable drug vial) used in the packaging and delivery of injectable drugs.

Why we hold it

Historically the business focused on standard components such as stoppers, seals, tip caps and systems for administering IVs but increasingly it’s shifting towards more complex products and processes which add extra value.

In its traditional market, West has a dominant market position, 3 times larger than its nearest competitor, at 70% market share. In newer markets, like biologics, West has an even bigger 90%+ market share.

But even perched on a pedestal this size, its defenses look sound. It’s extremely expensive for West’s customers to switch away from them – should they want to, they have to submit a drug application to regulators, where the cost of filing is the same as 1.3 million units of West products.

The business also has the weight of history behind it because it’s been behind every major advance to date. West’s drug master file is one of the single most-referenced documents in the US Food and Drug Administration archives, meaning the company’s intellectual property and tech capability will intimidate any potential competitors.


An Exchange Traded Fund (ETF), which can be bought and sold in large quantities, which aims to track the performance of the MSCI World index.

Why we hold it

We hold this ETF tracker as a source of dry powder. As we look to invest in new or existing holdings, we would rather stay invested than build up large cash positions. Stock markets have a tendency to rise over time, so holding cash in a fund is more likely, we believe, to end up acting as a drag on performance.


Live Nation Entertainment is the world’s leading live entertainment company, made up of four market leading businesses; Ticketmaster, Live Nation Concerts, Artist Nation Management and Live Nation Media/Sponsorship.

Why we hold it

Somewhere in the world, every 20 minutes there’s a Live Nation event. In 2018, the company put on a show for 250 million fans at 180,000 events across 44 countries.

Live Nation’s events attract four times as many fans as their nearest competitor, meaning artists call Live Nation first when they want to tour or promote a show. By attracting superstars, who sell the most tickets, Live Nation can afford to invest in cutting edge technology to create the best experience for fans, which leaves them wanting more from artists who, in turn, ask Live Nation to set up more shows.

In 2010, Live Nation merged with Ticketmaster, the world’s biggest ticketing business, in a move which we think bolstered its business model. Ticketmaster itself has 30% global market share and has expanded from 15 to 25 countries over the past eight years. It’s a powerhouse in its own right and allows Live Nation to capture more profit per fan at one of their events.

Finally, we believe Live Nation has a huge advantage versus other consumer businesses looking to expand into international markets because local demand for their product already exists. They don’t need to promote the Rolling Stones or Madonna or Drake, they just need to organise the event and bring the artist.

Once they have enough events in one country they can lease a venue, acquire local suppliers, bring in their own ticketing operations and begin to recreate their business model at a local scale. No other competitor can replicate this currently. That’s why we see Live Nation as a long term winner in this industry.


GoDaddy is a website hosting company and domain name giant.

Why we hold it

Go Daddy is the world’s biggest domain name company. It has over 78 million web addresses under management, and over the last few years has used this footprint to expand into other services that small and medium sized businesses need in order to build and maintain their online presence.

Domain names is GoDaddy’s origin, and it’s successfully become the market leader, but we were attracted to GoDaddy because it has evolved its business model and, in doing so, we believe has structurally improved the quality of the company.

Rather than focus solely on selling and managing domains, it now uses them as a funnel to bring customers into its ecosystem at relatively low cost, after which it can provide other applications and services which are more valuable to both GoDaddy and its customers.

By bolting on services or applications to their traditional domain proposition, GoDaddy has created a unique business model amongst its peers, and importantly for us, has created a virtuous cycle which supports growth and reinforces its barriers to entry.

The breadth and quality of GoDaddy’s services and applications creates value for customers, enabling it to charge more, which generates free cash flow which can be used to develop and improve products and create more value for customers.

Investor awareness of GoDaddy is still low, with the majority underestimating its financial strength. Because GoDaddy was bought by private equity in 2011 and IPO’d in 2015, it has accounting complexities which hide the underlying profitability of the business.

At first glance, GoDaddy has low earnings per share and a high price-to-earnings multiple, which could put investors off. But this low obvious profitability hides a business that’s generating exceptional levels of free cash flow, and has been growing consistently for year .

At HL Select, we believe free cash flow per share growth, not earnings per share, is a key driver of long-term value creation. Earnings per share is an accounting measure which can be easily manipulated, where free cash flow per share shows the actual cash generated over and above what’s required to keep the company in business.

We believe GoDaddy can keep growing free cash flow, and so long as it does, it will have more money to reinvest back into the business, acquire new businesses or return to shareholders. All of which should keep GoDaddy at the forefront of its industry over the long-term.


Autodesk is a leading provider of computer aided design software. Their products have wide and varied uses, from the refurbishment of Big Ben to special effects in the film Avatar. In all, they serve more than 200 million customers across industries such as construction, manufacturing and media.

Why we hold it

Autodesk is moving from a perpetual license business model, where customers pay when they want the latest software, to a subscription business model, where they make repeated payments and receive updates as and when they’re ready.

This change has significant benefits for growing the number of users and revenue per user, key metrics that drive long term revenue growth. The other key benefit from a subscription business model is it reduces the economic cyclicality of the business as customers can’t delay software purchases, even in a recession.

Autodesk has eighteen million active users but only four million of them are currently on a subscription contract. Less than two million are still on old perpetual licenses who are likely to upgrade as the need for updated software and functionality increases. The remaining twelve million are using pirated copies of the software!

Autodesk’s management have a long-term plan to coax customers into subscription plans, and while the cadence of new user additions will vary, we’re excited by the growth opportunity for new users. And once new subscribers are on-board, revenue per user should increase because Autodesk won’t need to offer the same level of discounts to turn old users into new subscribers.

Autodesk also has some unique characteristics which increase its barriers to entry. It provides free software to higher education covering an estimated 200 million students. Collectively these factors create a strong network effect as students choose software that the industry uses and the industry adopts tools that most graduates know well.

In addition, Autodesk spend more on R&D than peers, which creates value for customers, enabling them to increase prices, which increases profitability and grows the funds available for further product development.

This virtuous cycle fits well with Autodesk’s strategy of developing software that offers 80% of the functionality but at 20% of the price. Collectively this means Autodesk can offer a strong and growing value proposition to customers.


Visa operates one of the world’s largest payments networks. The company connects consumers, businesses, banks and governments in more than 200 countries, enabling them to pay or be paid digitally instead of by cash and cheques.

Why we hold it

How much cash do you carry when you leave home?

Chances are, much less than you did a decade ago.

And, how much shopping do you do online?

Probably more than you did. The volume of money spent online, including items from abroad, has grown dramatically and doesn’t look set to slow down. These factors are the driving force behind the growth in electronic payments.

Visa owns a very valuable network. The more shops that accept Visa, the more shoppers will use it, and the more shops will accept it - a virtuous circle. Using Visa provides buyers and sellers with a very valuable service at a surprisingly low price.

You won’t be surprised to hear that there’s a data story here too. Knowledge of shoppers’ spending habits is hugely valuable to retailers and Visa is increasingly helping them take advantage of it.

Obviously, competition exists, mainly from Mastercard and Amex, but we think the market is big enough for all to flourish. In particular, we think Visa’s sturdy balance sheet, great profitability, plus the capacity to make great returns from new customers with minimal extra investment are a real boon.


Aon provides insurance broking and HR consulting services to businesses worldwide.

Why we hold it

Over the years, Aon and its closest competitors have evolved their businesses into two main areas: insurance broking and HR consulting.

As insurance brokers, Aon helps other businesses insure the risks they face. They act as middlemen between clients and insurance companies, and take a percentage of the premiums their clients pay once they buy insurance. As HR consultants, Aon helps companies with retirement support, pension plan design and admin services, as well as health and benefits plan management and salary benchmarking. They tend to charge hourly for these services.

Aon has recently restructured to unify these two business areas, leading to improved efficiency, scalability, flexibility and enhanced client experience. We see this as a positive step, building on what was already a strong foundation.

Businesses can’t (or shouldn’t) ignore or stop the amount of time and money they spend on risk management, retirement or healthcare benefits, meaning a high proportion of Aon’s revenue repeats every year. Additionally, brokers and consultants build long-standing relationships with clients over the years, so clients tend to become loyal to Aon for their professional business needs. And finally, Aon’s global scale and low fixed cost base (no machinery, factories and little equipment required) means they are good at converting revenue into profits, and we think this should continue to improve as Aon grows.

One of the main drivers of Aon’s growth is the increase in client demand for their services. Risks are increasing in complexity and new risks continue to emerge (like cyber security), which, in general, are not well understood or catered for, hence the need for Aon’s expertise. On the HR consulting side, employers are typically underspending on retirement and overspending on healthcare and so need help to overcome problems like underfunded retirement plans and rising healthcare costs.


Pernod Ricard is the second largest spirits manufacturer in the world. Its top 10 products account for 70% of sales and include brands such as Martel, Absolut, Jameson and Chivas.

Why we hold it

We believe that the global spirits industry is the most attractive area within consumer staples. It offers strong margins and cash flows, supported by high barriers to entry and is well placed to capture value from the rising affluence of consumers in Asia and beyond.

Consumers in developed markets are drinking less but are spending more on what they drink, this is called premiumisation and has been supporting growth in the alcohol industry for the last decade.

Aged spirits such as Whisky or Cognac are natural beneficiaries of premiumisation as the same brand can have multiple different price points depending on rarity and age. This means that as consumer wealth increases they can easily trade-up to a higher priced product of a brand the consumer already knows and trusts.

Spirits have one of the highest gross margins of all consumer goods. High margins enable the business to invest in advertising and promotion to grow sales and increase their brand value.

Pernod Ricard’s key brands have on average existed for over 170 years, this gives the brand value and shows that they can grow across multiple generations.

Over 60 % of spirits have restrictions on the origin of their ingredients, manufacturing or ageing. For example Tequila and Cognac must come from defined regions in Mexico and France respectively. This makes it a lot harder for local competitors to start their own brands as they need to have infrastructure in the country of origin.

Currently less than 4 % of spirits consumed in China are international brands. Baijiu, a local grain based spirit, is the largest alcohol category in China. We believe the influence of western TV and film along with international travel will help international spirits increase their market share in China. This should help support above GDP growth for the foreseeable future.