One UK fund manager I keep an eye on is Stephen Yiu. He runs the Blue Whale Growth fund and has a great track record when it comes to generating strong returns for investors (his fund is up nearly 40% over the last year). Recently, I learnt that Yiu has been buying a FTSE 100 stock for his global equity fund this year. Here’s a look at the company he’s been investing in.
A top stock picker
Before I reveal the name of the Footsie stock, it’s worth touching on the portfolio manager’s approach to stock-picking.
A high-conviction investor, Yiu focuses on both growth and quality when selecting stocks. He’s looking for exceptional companies that have the ability to grow and improve profitability over the long term and that are trading at attractive valuations.
Since his fund was launched in 2017, Yiu has shown a great ability to pick big winners. In recent years, he’s made a ton of money (more than £100m) for his investors with Nvidia. Other stocks that have done well for the him include Microsoft, Meta Platforms, and Lam Research.
His new pick
As for the one he’s been buying for Blue Whale, it’s London Stock Exchange Group (LSE: LSEG), or LSEG as many refer to it. It’s a major financial markets infrastructure and data company.
After acquiring Refinitiv a few years ago, London Stock Exchange Group is now the world’s leading provider of financial data. Today, its data is used by 99 of the top 100 global banks and 75 of the top 100 global asset managers.
And one reason Yiu is bullish on the company is that it has partnered with tech giant Microsoft to enhance its offerings. Through this partnership, it will soon start providing its customers with AI-driven solutions such as customised Large Language Models (LLMs), AI analytics and modelling, data-management-as-a-service, and more.
Beyond a step change in revenue from the new solutions themselves, the flow-on effect will be greater demand for LSEG’s data, according to Yiu. He believes this should further entrench the company’s leading position and power the business for years to come.
If any further evidence is needed of LSEG’s leading position, look no further than Microsoft’s ~4% equity holding in the company – an investment that puts it in rare space along with other key Microsoft-backed AI players such as OpenAI and Mistral AI to name but a few.
Stephen Yiu
My view
I see this trade from the fund manager as an astute move. Over the last 12 months, I’ve actually been buying the stock myself.
I’m excited about the partnership with Microsoft. And I’m not convinced that it’s fully factored into the valuation yet. Currently, London Stock Exchange Group’s P/E ratio, using next year’s earnings forecast, is just 23. That’s quite low for a major financial data company.
A risk with this business is that it’s up against some big players including Bloomberg and FactSet. These companies could steal its market share.
But I’m optimistic that the group has what it takes to thrive in the years ahead.
It’s worth noting that in late May, analysts at Jefferies raised their target price for the stock to 11,500p from 11,000p. That new target is more than 20% above the current share price.
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Ed Sheldon has positions in Lam Research, London Stock Exchange Group Plc, Microsoft, Nvidia and Blue Whale Growth fund. The Motley Fool UK has recommended Lam Research, Meta Platforms, Microsoft, and Nvidia. Randi Zuckerberg, a former director of market development and spokeswoman for Facebook and sister to Meta Platforms CEO Mark Zuckerberg, is a member of The Motley Fool’s board of directors. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
