Our Fund was launched in 1963 and there aren’t many companies who are “Senior” to us. Dr Martens is. The company launched its first boot in 1960 and remains an iconic brand even today. 

Dr Martens is a British company that designs, develops, and sells footwear. The Company operates in America, Europe, and Asia-Pacific with product categories that include Originals, Fusion, kids, casual, and accessories. Though it operates in over 60 countries globally, its new “digital first” strategy is gaining traction while it takes back operations from franchisees. 

The company’s IPO in January 2021 was a massive success with the backing of a who’s who in the banking world: Morgan Stanley, Goldman Sachs, Barclays, BofA Securities, HSBC, and RBC Capital Markets. It was a well-marketed IPO and demand at 370p per share was not a huge surprise. However, the “IPO” was exactly that – It (was) Probably Overpriced. On listing the shares even crossed £5/- and frankly, that was not the time to pull the trigger. 

We kept track* of developments from a distance. Fortunately, the market gave us an opportunity to buy those very shares at half the price and we did.

With Kenny Wilson as the CEO and Jon Mortimore as CFO, we believe this is one of the best CEO-CFO combinations in the London market today. We have no doubt this 62-year-old company is very much young at heart and has a long way to go.

*PS: There can be periods, sometimes months, when we do not buy (or sell) a single company. That does not mean we are asleep at the wheel. Rather, we are continuously reading, analysing, and meeting management teams, building our knowledge base on “target” companies.

We are “active” investors but that does not mean we frenetically trade in-and-out of companies. As Charlie Munger says, “It’s waiting that helps you as an investor, and a lot of people just can’t stand to wait”. Our advantage is our long attention span in a world suffering from overstimulation and the wish for instant gratification. Constant trading only provides the illusion of hard work rather than real returns.  We are patient asset allocators, carefully scouting the field, waiting for opportunities that deliver results, not chasing illusions.

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In its recent annual report update as of April 2022, food manufacturer Premier Foods reported continued strong operational performance and increased its profit guidance for the full year. Revenues decreased by 3.5% but the annualised growth stands at 4% over the years as the company continues to win market share with its iconic brands (Mr Kipling, Bisto and Homepride to name a few).

On 25 July 2022, the company acquired The Spice Tailor, a premium authentic Indian and South East Asian recipe kit maker for £43m. The brand will be complementary to the Group’s Sharwood’s and Lloyd Grossman brands and will benefit from Premier’s wide distribution network.

CEO Alex Whitehouse has done a fantastic job since taking the helm and if the market fails to value the company properly, it may well fall into the hands of private equity.

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CEO Carlo Centonze is the driving force behind HeiQ, a leader in textile innovation. Conceived during a hike in the Swiss Alps in 2005, today the business has established 10 patent families and over 600 brand partnerships worldwide. Recent results confirmed a consistent performance, with sales in the year to 31 December 2021 up 15%, to $57m. HeiQ has also undertaken some sensible acquisitions; sustainable products specialist RAS AG and probiotics firm Chrisal.

One common theme that readers will observe in our holdings is our focus on three things: management, management, and management. In each case, these leaders run their businesses with a true ownership mindset and they love what they do. In our opinion, they are not principally driven by financial gain. Instead, they care for company culture and play to win while delivering value to customers and all stakeholders.

We like to focus on good companies but prefer ones that are undiscovered and under-researched. These companies also have limited broker coverage and we like to buy them before others identify their attractions.

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Coca-Cola HBC AG, a Switzerland-based bottler of Coca-Cola products. It has the exclusive rights to manufacture and sell Coca-Cola products in Austria, Cyprus, Greece, Italy, Northern Ireland, the Republic of Ireland and Switzerland. The countries it supplies in developing markets include Croatia, the Czech Republic, Estonia, Hungary, Latvia, Lithuania, Poland, Slovakia and Slovenia while under the emerging markets, the countries covered are Armenia, Belarus, Bosnia and Herzegovina, Bulgaria, Macedonia, Moldova, Montenegro, Nigeria, Romania, Russian Federation, Serbia and Ukraine.

Our core strategy is: buying great companies. Buying good companies is great but not good enough. History has taught us that if we want good outcomes (read positive returns) the purchase price must also have a margin of safety.

Unfortunately (and often) great companies trade at high valuations i.e. a £10 currency note trades at £20. The note may be crisp and new but we refuse to pay more based on the “hope” that we will find a greater fool. Hope is not our strategy and never will be.

Putin’s attack on Ukraine would affect Coca Cola sales in the country and the company has also withdrawn from Russia. The market did not like this and when the price was weak we had our chance to buy at an attractive entry point. As long-term investors we are very happy to buy a first-class company at a fair valuation and hold for the long term – fully aware about the short-term negatives (which are widely known and, in the price). As the wise have said: Be greedy when everyone is fearful. We have the mindset do so.

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Private equity investment specialist Intermediate Capital Group released its annual report for the year to 31 March 2022. During the period, fundraising remained strong, with the company attracting $22bn of new capital in the first few months of its FY 22, with total assets standing at $72bn at the end of the period.

Further, in its Q1 trading statement for the three months ended 30 June 2022, the company reported that its Europe VIII fund closed at €7.8bn (ahead of the target €7bn) and its Strategic Equity IV Fund closed at $4.2bn. The Funds are raised across borders hence the figures are in different currencies. The experienced team ensures investments are made with downside protection and the total liquidity in the balance sheet stands at £1.4bn.

Over the last 5 years, third-party assets have grown at an annualised rate of 16% as large pension schemes are finally recognising ICG’s expertise.

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Treatt is a UK-based manufacturer of natural extracts and ingredients to consumer products (especially beverages). It specialises in extracting flavours from citrus, coffee, tea, fruits, and vegetables. We have been shareholders in Treatt for over ten years now and the company has significantly strengthened its technical expertise over this period.

It recently completed its planned capacity expansion in the United States and relocated its UK manufacturing too. The company has a customer base of multinationals and is well positioned to capitalise on secular consumer trends such as lower sugar and preference for natural (over artificial) flavourings. We believe, trend is the company’s friend.

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Russian Doll Investing: Given the experience of the team, we have the skills in-house to value a wide range of businesses. One area we like to invest in is sum-of-parts opportunities – especially if we can invest at a discount before the market wakes up to the embedded value that we have identified.

Such situations can provide a good margin of safety if our assessment of hidden value is accurate. Our holding in Open Orphan provides a good example. Having followed one of its acquisitions, Venn Life Sciences, for a number of years, we took the decision to invest in Open Orphan in May 2020. In the past, founder Cathal Friel had shared his plans on extracting value from non-core assets via spin-offs and it is a delight when managements actually deliver on their promises. The proposed spin-out of Poolbeg Pharma announced in mid-June represents the first step along this journey; in the coming years, we expect more Russian dolls to emerge.

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Euromoney is a global B2B information-services business. The company provides actionable data, analysis, intelligence, and access through three divisions: Fastmarkets, Financial & Professional Services (FPS), and Asset Management.

A consortium of funds has bid £1.7bn for the company. We may have nearly doubled our money but feel there was more upside. Sadly, it is the buyers who will benefit from the “sum-of-the-parts” that the astute Andrew Rashbass has painstakingly assembled.

Side note: at a fundamental level, we find it displeasing that our great British companies are being taken out, one after another. We want more and more good companies to be listed – not delisted.  

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