Why this UK stockpicker is now looking to the US
A top UK stockpicker is betting on small companies listed on the London Stock Exchange that make most their cash overseas amid fears the British economy will stagnate this year.
“The winners will be US or global earnings with a London listing,” said Laurence Hulse, manager of the UK small company-focused Onward Opportunities trust.
The trust revealed today that its underlying assets had surged 23.4 per cent throughout 2024, compared to a 3.9 per cent fall in the UK AIM All Share index, which tracks all companies listed on London’s junior market AIM.
Hulse said the trust’s performance for the year went from “good to great” when a £216m bid was made for its top holding, maritime AI firm Windward, on Christmas Eve.
The trust bought into the stock at between 45p and 120p a share over the last eighteen months, before the company was offered a takeover for 215p per share by US investor FTV Capital.
The takeover of Windward showed “the amount of value on offer for investors on the public markets,” argued Hulse.
As he expected 2025 to be a “weak” year for the UK economy, he was instead looking for UK-listed companies that focus internationally, both because he expects their earnings to outperform but they are “more likely to garner takeover interest”.
All three new entrants to Hulse’s portfolio in recent months have been small UK-listed firms that focus internationally to bring in their cash.
These include podcasting publisher Audioboom, that Hulse said should trade at least double what it was currently, and Alumasc, a Kettering-based supplier of building products.
However, the best performer of the trust’s new entrants so far has been Synectics, which has added £1m in returns since it entered the portfolio, making it the third largest contributor to performance in 2024.
Synectics, which Hulse described as a “classic hidden gem”, makes security surveillance software primarily for casinos, which have been returning to normal following the coronavirus pandemic.
Significant contracts with casinos won by the firm recently include Singapore’s Marina Bay Sands, which the manager said could spur a wave of new contracts for Synectics.
“Alongside that, they can use this expertise in the monitoring systems for casinos and roll them out into other sites,” said Hulse, noting that the firm had recently won a contract with the National Grid.