LONDON -- Warren Buffett is probably the world's greatest living investor. Sometimes, when he likes a stock so much, he buys the entire company. This is the exact strategy I would pursue if I won the Euromillions jackpot. There'd be no popping champagne for the cameras while holding an oversized check; I would be straight on the phone to company executives and making offers.
Below, I've picked out some companies I would be very happy to own outright that are currently priced at less than a big Euromillions win. To make up the full 10, I've included some larger companies I would seek a large stake in. While there might be other shares on the market today that I believe offer better value, these are the companies I would feel most comfortable being owner of.
Here are my 10.
P/E (historic, %)
Yield (historic, %)
Market cap (millions of pounds)
|Novae (LSE: NVA.L )||N/A*||4.8||240|
|Brooks Macdonald (LSE: BRK.L )||22.0||1.5||139|
|First Derivatives (LSE: FDP.L )||15.5||2.4||79|
|GOALS Soccer Centres (LSE: GOAL.L )||9.1||1.5||58|
I think that four of these deserve further comment.
GOALS Soccer Centres
GOALS Soccer Centres is a manager of outdoor five-a-side football centers. GOALS is one of AIM's most successful companies; the company has never cut its shareholder dividend. Today, the payout is more than three times the level that it was in 2006.
GOALS shareholders recently rejected a takeover offer from a Canadian pension fund. This was priced at 144 pence per share, valuing GOALS at 73 million pounds.
GOALS has enjoyed great success in the last six years. Annual sales have increased from 16 million pounds to 30.4 million pounds; earnings per share (EPS) has grown similarly. With GOALS' first U.S. site now trading profitably, further growth is possible. Given that fact, it is not surprising that shareholders declined an offer that amounted to only 10.8 times 2011 earnings.
The shares have fallen since the takeover was rejected. GOALS today trades on a 2012 P/E of just 8.7. This falls to 7.8 times consensus 2013 estimates.
GOALS will announce interim results on 28 September.
Novae is a non-life insurer. One of the best things about investing in this sector is the lack of correlation with other shares. Provided an insurer is well run, with a keen eye on underwriting risk, then dividends can be large and reliable. The problem is that large losses can come out of a clear blue sky.
I've successfully invested in Novae twice before. My strategy has been simple: Buy at a large discount to net tangible asset value.
The insurance market is cyclical in nature. A few years of good underwriting returns attracts competitors. This flow of capital reduces premium rates. Lower margins mean companies are more exposed to losses. When capital is withdrawn from the market, rates move upward as insurers can name their price.
Novae has been increasing its dividend for the last five years. At the interim stage, the company reported net tangible assets of 428 pence. While this is less than the usual discount I require, the income makes the shares a good store of wealth.
First Derivatives already has one shareholder with a massive stake in the company. Founder and CEO Brian Conlon owns 46.5% of the financial software specialist.
First Derivatives is an exceptional company. Along with having a CEO with so much skin in the game, First Derivatives is one of just four Northern Irish companies that is listed on the London Stock Exchange. On top of this, First Derivatives has enjoyed exceptional growth. In the last five years, sales at the company have increased at a compound average growth rate of 37.5% per annum. At a rate of 16.2% per annum, EPS has similarly increased. The shareholder dividend is now 10 times the size it was eight years ago.
To cap it, further growth is expected. This means that today, First Derivatives shares trade on a forward P/E of 11.7 times the 2013 consensus estimate, falling to 10.1 times the 2014 figure.
In five years, Brooks Macdonald shares have advanced from 288 pence to 1,305 pence today. This is in contrast to its peers in the asset management sector.
Brooks has ensured its shareholders have been rewarded by the business' progress. The company has increased its shareholder dividend every year since 2005: from 1 pence then to 18.5 pence per share in 2012.
Brooks Macdonald provides a range of professional financial services. Brooks Macdonald operates fund management offering, employee benefits, financial consulting, and estate management. In the most recent results, funds under management increased 47% (helped by market rises), and property assets increased 15%. While management sounded some caution over the impact of the Retail Distribution Review, Brooks Macdonald still has the look of a growing business.
Consensus forecast is for EPS to rise 25% in 2013, to be followed by another large rise the year after. The dividend is expected to follow a similar trajectory.
The truth is, I am unlikely to win the Euromillions, so I'm going to need an alternative strategy to build my wealth. The Motley Fool has a free report that details how the stock market can help. "10 Steps to Making a Million in the Market" explains how you can grow your investments through investing in shares. The report is 100% free and will be delivered to your inbox immediately.
David Kuo challenged his Motley Fool analysts to pinpoint the attractive sectors of 2012 -- and they delivered! Discover the industries they selected in this new Motley Fool guide -- "Top Sectors of 2012" -- while it's still free!
Further investment opportunities:
- The One U.K. Share Warren Buffett Loves
- How to Unearth Great Oil & Gas Shares
- The 12 Best Dividends in the FTSE350