“Invest in what you know” is an adage by highly respected investment guru Peter Lynch, but has anyone tried the opposite approach?
I am talking about investing in companies you have never heard of.
Bear with me, here; I am not talking about ploughing your life savings into a start-up company whose business plan is to set up a drought advice consultancy in Manchester.
I am talking about investing in FTSE 100 companies that you have never heard of.
Ireland's biggest company
The idea was sparked by this morning's announcement from DCC Plc (LON:DCC), the … er … something something group based in somewhere or other, that it is to acquire Shell's liquefied petroleum gas business in Hong Kong and Macau.
I am a financial journalist – that's what it says on my passport, so it must be true – so I should really know what a FTSE 100 constituent valued at about £6.4bn does, but the fact is I did not until I researched it for the purposes of this article.
It's a “leading international sales, marketing and business support services group”, based in Dublin – which probably explains the relatively low profile in the UK.
In May 2013, it cancelled its listing on the Irish stock exchange and changed the currency in which the shares were quoted on the London Stock Exchange from euros to pounds, reflecting the increasing internationalisation of the business, and the fact that most of its shareholders are based in the UK and North America.
The change also enabled it to seek admission to the FTSE UK index series, culminating in the shares ascending to the FTSE 100 index in 2015 after rising some 60% that year.
The shares have tripled since the company made London its main listing, and after a lull in the final two months of 2016 the shares look to be on the march again.
Croda chrome
Croda International PLC (LON:CRDA) has been around for yonks (1925, in fact), but it must have sneaked into the FTSE 100 while I was not looking.
A 1,314% increase this century in the share price will tend to promote what I still think of as an anonymous mid-cap into the big league.
Croda is a speciality chemicals company, as I have written many times without, I must confess, stopping to wonder what is so special about the chemicals.
Do they make coatings that make a company invisible?
Quite possibly. Here's their laundry list of business areas: Coatings and Polymers, Crop Care, Geo Technologies, Health Care, Home Care, Industrial Chemicals, Lubricants, Personal Care and Polymer Additives
It may not be a fashionable company and it probably won't ever appear in newspapers except on the City page and maybe occasionally the science section, but its expertise and technologies seem to be at the very core of modern products.
Like Smith, if not its nephew
ConvaTec Group PLC (LON:CTEC) only listed in London back in October, so there are reasons it is not particularly a household name in the UK.
Its history dates back to the late seventies, when it began operating as a division of E R Squibb, which later became part of US medical giant Bristol Myers Squibb.
Its flotation raised £1.5bn, and its valuation on listing was more than £4bn; that has since risen to £5.5bn.
Its peers include the much better known Smith & Nephew, and its strengths lie in wound care and ostomy care, which is not a subject that is going to feature on the gossip pages very often.
Nurse, the screens!
South African private hospitals operator Mediclinic International PLC (LON:MDC) raised its UK profile (from 'invisible' to 'low') when it gained a London listing by reversing into Al Noor.
The takeover beefed up its presence in the Middle East, but this has proved a mixed blessing.
The company is doing well in Dubai but in Abu Dhabi trading conditions remain challenging, as patient volumes and operating performance continue to be below expectations.
The above update was issued in February, and the company said the weaker trends in Abu Dhabi were particularly pronounced in January, which has put the wind up investors this year.
The shares have fallen 12% this year in a rising market.
It's international presence make it potentially a good choice if you are worried about UK-focused companies in the wake of the Brexit decision.
The very name screams "seventies"
It's unusual for a technology company to fly below the radar, but Micro Focus International PLC (LON:MCRO) has always operated at the trailing edge, rather than the bleeding edge, of the computer software world.
If programming languages such as COBOL and Pascal mean anything to you, then like Micro Focus you have probably been around for years.
Micro Focus started in the late seventies, when Britain was a hotbed of geekdom – well, until Sir Clive Sinclair blew his reputation with the C5. Electric cars? They'll never catch on!
The UK company ran into some choppy waters and the focus moved to California. It floated – for the second time – in 2005, and went on an acquisitions blitz but it was the 2014 acquisition of The Attachment Group that catapulted it into the big time, giving it some well-known if slightly dinosaury brands such as Attachmate, Novell and SUSE.
Even that acquisition did not really make it a household name, but chances are its recent US$8.8bn acquisition of Hewlett-Packard's Enterprise business will put paid to its days as an overlooked blue-chip.
The shares are up 50% over the last year and up 263% over the last five years, all of which will give it the share value to make more acquisitions.
Inchcape Testing Services
The last of our “biggest companies you have probably never heard of” is Intertek Group PLC (LON:ITRK), the quality control company.
It provides a range of services, such as technical inspection, asset integrity management, analytical testing, and consulting and training services, making it the classic “seller of pick axes to gold prospectors” company.
It listed in London on 2002, so it has been around for a long time. When it listed it had a market capitalisation of £614mln, which has now risen to £6.4bn.
It used to be called Inchcape Testing Services, so presumably was part of Inchcape when that company was a conglomerate.
It has been quietly serving retailers, distributors, manufacturers, traders, industrial bodies, oil and chemical companies, and governments for decades without ever, so far as I know, ever getting involved in the sort of scandals that laid low G4S and Serco.
Which is a good thing, and kind of the point of the “invest in a big company you have never heard of” philosophy.