- Capital-light innovation a plus point for growth.
- Steady compounders make great buy-and-holds.
A well-established and well-executed business model in structural growth markets offers the best investment opportunities. Introducing innovative new models, especially those that are capital-light, further enhances this potential. We see potential for investors to achieve a double-digit Total Shareholder Return (TSR) from both the food services outsourcer Compass and, perhaps more unexpectedly, the fashion retailer Next.
Compass Group (CPG) – This food services outsourcing company has an excellent track record. With ongoing structural industry growth, strategic acquisitions, and continuous internal improvements, Compass is well-positioned to continue delivering a double-digit Total Shareholder Return (TSR). A stable, long-term Price-to-Earnings (PE) ratio, market expansion, Earnings Per Share (EPS) increases through consistent share buy-backs, and a growing (though modest) yield all support the positive investment case for Compass. Despite the share price more than doubling since the end of Covid-19, spurred by high food price inflation that benefited food outsourcing, Compass remains a strong investment. As a 'growth compounder,' it is an excellent stock to buy, hold, and forget.
