There’s nearly always something to be fearful of as an investor. You may well think that’s particularly the case now with the potential for Jeremy Corbyn becoming Prime Minister, the still-real possibility of a hard Brexit or, from a global perspective, of Donald Trump showing little desire to end the trade war with China.
But while this may be a particularly nervous week for investors, there will still be companies that continue to thrive regardless of who’s in power by Friday.
Bolt-on growth
Spectris (LSE: SXS) is a supplier of industrial instruments and controls. Any government is likely to be supporting UK innovation and high-end manufacturing. Therefore, I see political threats as negligible for this business. Brexit may be another matter, but investors will have to wait and see about that.
The business operates in four segments with materials analysis being the largest, both in terms of sales and operating profit. This division helps determine structure, composition, quantity and quality of particles and materials, during their research and product development processes and has applications in drug discovery and for other industries.
The focus on bolt-on acquisitions is a key one for management to help win new customers and open up new countries. The engineer has a history of making multiple small acquisitions each year and integrating them into the group, a model not dissimilar to that of the very successful Halma. Done well and carefully, acquisitions can be a good way to grow.
A profit improvement programme is likely to benefit shareholders. Spectris is expecting the programme to deliver at the upper end of the £15m-£20m range.
The shares, on a P/E of just under 17, don’t look too expensive given the opportunities for growth and the success of management in building up the business to date.
Stellar performance
IT reseller Softcat (LSE: SCT) is a business that is going from strength to strength. While US technology companies may come under increasing pressure in the future, it’s less likely this will extend to UK technology companies.
The share price momentum shows why this is a share that should continue to keep going up. Over the last 12 months, the share price has risen by over 80%.
Management will have to keep delivering the growth investors expect in order for the share price to maintain its momentum, but I think the right factors are in place for this to happen. There’s increasing IT spending, the challenges for businesses of moving their IT onto the cloud, and the need for ever more cybersecurity.
Customer numbers are on the rise, which is good news and shows that demand for what Softcat does is not going away. The gross profit made from each customer is also increasing year-on-year, demonstrating the value customers find in Softcat and showing it’s successfully able to cross-sell services.
Even on a P/E of 32, I think it will continue to thrive after the election, throughout 2020 and then beyond.
