Page 37 - DIY Investor Magazine - Issue 23

‘IT COMPRISES THE STRONGEST SUB-SECTOR POSITION WITHIN THE TRUST’S HOLDINGS.’
PROPERTY AND CONSTRUCTION
Despite a prolonged downturn in the volume of UK housing sales, outside the traditionally overheated London market prices and demand remain relatively healthy in regions including Yorkshire, the Humber and Scotland.
The trust continues to be substantially overweight in Bellway, a FTSE250 company with a 70-year trajectory from family business to becoming one of the UK’s biggest house builders. The firm sold more than 10,000 homes in 2018 in hotpots from Bristol to Scotland, with a return on capital employed of 27.2%1
Meanwhile, as time-poor consumers increasingly turn to ‘do it for me’ as opposed to DIY, building materials distributor Grafton Group PLC is well positioned to profit from Selco, its trade-only warehouse format for which it has ambitious growth plans.
Finally, finding potential in another thriving sub-sector, we have a strong holding in Derwent London, a real estate investment trust (REIT) focused on the healthy London creative industries sector, with a portfolio worth £5.2billion.
1Source: Bellway Annual Report 2018 P2
RETAIL
In the current UK political climate consumer confidence lags behind the increase in disposable income. However, while the media may be focused on struggling traditional high street retailers, behind the headlines there are businesses exploiting sub-sectors with plenty of room for growth.
These include discount store owners B&M European Value Retail, who with minimal advertising spend and an aggressive pricing policy have grown to a chain of nearly 600 shops in the UK. Already owners of German chain J. A. Woll, B&M purchased French retailer Babou in October 2018 to position themselves in the three strongest European markets.
SECTORS AND COMPANIES TO WATCH
So, while ongoing uncertainty around Brexit has continued to impact valuations of UK equities, the strongest firms across a range of sectors could be set to benefit as soon as the fog has lifted. As our choice of sectors and stocks determines the relative performance we are able to deliver, it’s worth taking a closer look at some of our holdings.
SOFTWARE AND COMPUTING
IT comprises the strongest sub-sector position within the Trust’s holdings, a situation which is likely to continue since the best firms offer huge potential over the long term.
Specialised software firm AVEVA Group plc is a global leader in its field and stands ready to benefit strongly from the so-called Fourth Industrial Revolution. Working across industries as diverse as mining, utilities and biotechnology, AVEVA provides solutions to optimise business efficiency, from planning and procurement to operations.
Another business in which the trust has an overweight position, Softcat provides infrastructure, digital workspace, cybersecurity and IT efficiency solutions to well-known names like Virgin Money and Nuffield Health. A FTSE 250 company, the firm has enjoyed strong ongoing growth and hit the £1billion revenue milestone in 2018.
37 DIY Investor Magazine | Oct 2019