One of the best places to find investment ideas is by trawling through high-performing investment manager's top holdings to see what they think the next market-beater will be.
NAOS Absolute Opportunities Co Ltd (ASX: NAC) is one of the listed investment companies (LICs) run by Naos Asset Management.
Over the past three years the portfolio has returned an average of 18.51% per annum, thoroughly beating the ASX200.
It's fair to say that the Naos investment team can identify a good long-term investment opportunity.
One of the biggest contributors to the LIC's strong performance has been Gentrack Group Ltd (ASX: GTK).
Gentrack describes itself as providing essential services for essential software. Its clients operate in the energy, water and airport sectors. Red Energy and nPower are two of Gentrack's biggest energy customers and Auckland International Airport Ltd (ASX: AIA) is one of its biggest airport customers.
Gentrack's share price has risen by a whopping 170% over the past two years, but there could be a lot more to come.
The business has made a number of clever acquisitions which add scale and different functions to Gentrack's offering to clients.
Management expect continued growth in FY18 to be driven by ongoing energy and water market reforms in the UK and Singapore. It's targeting long-term earnings before interest, tax, depreciation and amortisation (EBITDA) growth of 15%, although the timing of projects can affect this.
The business is expanding its research & development program to help deliver on long-term targets. It's also moving into new Auckland headquarters and expanding its Melbourne & London offices to support growth.
In FY17 it grew revenue by 43%, EBITDA by 43% and net profit after tax by 54%. Without the acquisitions it grew revenue by 18% and EBITDA by 24%. Most businesses would be happy with these results.
The business has a great future, particularly with its airport segment which grew EBITDA by 60% in FY17.
Foolish takeaway
Gentrack is currently trading at 45x FY17's earnings with a dividend yield of 1.9%. I'm a fan of Gentrack and wish I'd bought shares earlier. However, a lot of growth is now factored in, so I'd be very wary of buying at today's price. If the share price were to drop then I would be very interested.
