Whereas most of my friends are getting married and moving further out of London, I seem to be drawn the other way. Each move brings me ever closer to the office. Perhaps this denotes something of a contrarian nature or potentially flagging the early stages of a mid-life crisis. We shall see.
Having recently moved to Borough, I now have the privilege of being able to walk into the office. No more rammed tube carriages for me – instead I get to take my own path through London’s streets. So far so good.
On my way in last week, trying a slightly different route, I walked past a shrine to ‘The Outcast Dead’ on the Redgate in Redcross Way. It turned out this marked the Crossbones Graveyard – a disused post-medieval burial ground, initially for ‘Winchester Geese’ (16th century slang for women of the night). By the time it was closed in the 1850s, an estimated 15,000 paupers from one of London’s poorest and most violent slums were buried there. A fascinating, albeit dark bit of history just a stone’s throw from my new flat – unsurprisingly not mentioned by my estate agent (who focused on the ‘cosy’ dimensions and the health benefits of four flights of stairs).
On another day I walked past St Pancras Church Garden, an oasis near Bank station marking an 11th century church burnt down in the Great Fire of London. I only discovered it after taking a wrong turn. These are two remarkable little gems hidden amongst the hustle and bustle of the mega-city that London has become.
It’s amazing what you miss when you fall into a routine of home, tube, work, tube, home, repeat. Or what you find when you take the time to look (or simply allow yourself to get lost sometimes). But it’s unsurprising, really, that a large city with such a deep history should be packed full of these overlooked assets. We take the same attitude with the US. The world’s largest economy has the deepest and broadest capital markets, with a wealth of hidden gems lurking there. You just have to take the time to stray from the typical transatlantic investor trail.
As a team, we’ve always had a relatively large proportion of our portfolios in American assets. Partly this is due to better return on invested capital (ROIC) and other of our favoured metrics, but it’s also because the sheer size of the US presents us with so many interesting opportunities. While the FTSE 100 has some fantastic companies, some of which we own, it is relatively narrow (financials, energy and materials make up nearly half the market) and liquidity (trading in reasonable size) can become difficult as you get to the lower end of even these “large-caps”. Contrast with the S&P 500, which has 400 companies that would get into the top half of the FTSE 100.
This throws up opportunities. For instance, we have bought a utility with a much more stable political and regulatory backdrop to those operating in the UK. Wisconsin Energy (WEC) is run by an excellent management team headed by the affable and able Gale Klappa, who regularly comes into the office to see us. WEC generates and distributes electricity, predominantly to Wisconsin, but also Illinois and Minnesota. The company was the country’s most reliable electricity company last year, critical in a place where weather can be severe (-20 degrees Celsius is not uncommon).
WEC is able to generate the inflation-proofed revenue expansion expected of a utility, but it benefits from local economic growth too, potentially giving it a growth booster. Wisconsin is an attractive place to do business, having recently enticed both gummy bear producer Haribo and Taiwanese hardware giant Foxconn to build factories there (the latter is building a $10bn complex creating thousands of jobs). Both of these projects will require oodles of reliable energy which WEC will be more than happy to deliver.
So while some UK utilities find themselves on the end of profit warnings this summer and one step closer to the graveyard, I prefer to stick to our little oasis in cold Wisconsin.
