Stock picks to buy, investing strategy from top small-cap fund manager - Business Insider

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The best small-company stock-picker of the last 5 years tells us what he added to his portfolio after the market crashed — and shares his 3 favorite investments for the next decade

If he's able to do that, clients probably won't complain about being bored — not that boring seems like such a bad thing these days. But when Rayner kids that his approach is boring, he means it's systematic. He wants to find companies with "high and consistent returns on invested capital," strong competitive positions, and great balance sheets.

Its price fell by 50% between mid-February and mid-March, and he says he was happy to have another chance to buy it. "You have a customer for life because that limb is part of your body. So you get upgrades, you get recurring replacement parts and revenues, et cetera," he said., a British company that makes 3-D design software that Rayner has bought and sold several times before. He says investors feared its business was going to be crushed because its oil and gas industry customers were losing revenue and closing rigs.

That gives the company a huge customer base spread across lots of industries, which means it isn't vulnerable to a downturn in one of them. The result is predictable demand growth and huge returns over time, including more than 50 years of annual dividend growth. That means the company has extremely high subscription renewal rates, and the barriers to entry for possible competitor are huge. That's a good sign as the company looks to consolidate the Scandinavian market.

 

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