Ask A Fund Manager
The Motley Fool chats with the best in the industry so that you can get an insight into how the professionals think. In this edition, Tribeca Investment Partners portfolio manager Simon Brown picks the stock that would let him sleep soundly for years to come.
The ASX share for a comfortable night's sleep
The Motley Fool: If the market closed tomorrow for four years, which stock would you want to hold?
Simon Brown: Always a curly one, isn't it?
I'm just having a look at the portfolio. I'd be comfortable with a lot of them.
Look, I would say Johns Lyng Group Ltd (ASX: JLG). Have you heard of them?
MF: Yes, I own those shares.
SB: That's a business that's got that growth premium because it has been growing very strongly. But a name like that, I think that the runway for growth is quite long and there will be periods of multiple expansion and contraction, as those discount rates go up and down with the level of interest rates.
Arguably, interest rates may have seen their lows for some time — 12, 18 months ago. We exist in a higher rate environment than we were 18 months ago. But I think that a business such as this has such a strong level of underlying growth, particularly now they've got exposure in the US. It is just such a huge market.
They've got a flag in the ground over there, so to speak. The ability for them to keep expanding and use the type of strategy that they've used here in Australia, to be successful over there. It just makes 100% sense to continue to expand and partner with insurance companies and, essentially, replicate the model that they've had here over there.
So I think that's a business that you could be very comfortable in a four-year growth outlook. And earnings would be much higher in four years' time than we currently sit today.
MF: Some say it's a climate change play because they get much business from big natural disasters, don't they?
SB: Cat — catastrophes — they call them.
Yeah. If you talk to some people in the insurance industry, they're of the view that these catastrophes are, due to climate change, going to be a little bit more recurrent than they have been in the past. Which should mean that there's more reconstruction work required from people such as Johns Lyng.
