The Five Favorite Stocks Of…Christian Schmidt (Athenia)

How is the performance of the stock market in the summer? directione Stock market watchers poll weekly about their favorite securities.

This week is Christian Schmidt, Senior Portfolio Manager at Ethenea Asset Management in Luxembourg.

1 / Bunzel

With a market capitalization of around €12 billion, London-listed Bunzl ranks second in size among European stocks. But judging by its price performance over the past 25 years, Bunzl is undoubtedly playing in the Champions League and has easily outperformed many major stocks in well-known indices.
Bunzl focuses on the distribution of consumer goods to corporate (B2B) customers, such as large hospitals, hotels or restaurant chains. Since they typically provide low-cost items like paper towels, Bunzl thrives on mass distribution, achieving economies of scale and keeping competition at bay.
“Bunzl has a consistent and proven growth strategy that combines organic growth with operational improvements and acquisitions. It benefited from the pandemic, and the ensuing reopening and inflation. The stake is a great asset for many environments.”

2 / Fontere

“Have you ever heard of a cash pool? The US industrial company Vontier is one such company. It acquires companies with sustainable competitive advantages (mainly in oligopolistic markets), increases operating margins and reinvests cash flows to drive more inorganic growth. It is Part of Danaher and Fortive (other US-based cash aggregators who passed their tactics to Vontier) and has been operating under the radar since becoming a separate entity in October 2020.
“The company focuses on mobility technologies (such as electric vehicle charging software) and diagnostic repair technologies (such as tire repair kits).”

3/ Paylocity

“Paylocity is a provider of cloud-based HR and payroll software solutions. The company has so far captured a low single digit share of a huge market. This gives Paylocity a long opportunity to expand. It is growing by disrupting major service providers, moving into adjacent market segments and deepening its service offerings.
“Although Paylocity has the growth rates of the latest technology revolution, it is profitable on the margins of a mature cloud company. In addition, Paylocity benefits from higher interest rates—unusual for a growth stock—because it invests customer-managed funds in funds Therefore, any increase in interest rates will have a positive impact on Paylocity’s net profit.”

4 / Coloplast

“The Danish medical technology company is active in stoma and urethral care. It produces aids and related products that enable the removal of bodily waste from the outside. Coloplast is a leader in this non-cyclical market, whose growth is driven by demographic trends and increasing healthcare coverage in emerging markets.
“Coloplast has a culture of hands-on innovation. It maintains close relationships with its customers, whose feedback forms the basis for product improvement. The company has above-average organic growth and an operating margin of nearly 30 percent. With minor exceptions, Coloplast is rated as dividend aristocratic.”

5/ TJX

“TJX is the largest discount clothing and homewares retailer in the United States and is continually expanding its reach in the rest of the world. In Europe, it operates primarily through TK Maxx stores and has many opportunities for store growth in the future.
“It has emerged stronger from the Covid-19 pandemic and is currently taking advantage of the inflationary environment as discount TJX brands offer price-sensitive offers to customers.
“In addition, TJX has an excellent capital allocation policy, as the company has been consistently buying back its shares and increasing dividends for more than 25 years (excluding 2020).”

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