Investment Strategies

EXCLUSIVE: Europe's Comgest Outlines Favorite US Stock Picks

Amanda Cheesley Deputy Editor August 8, 2023

EXCLUSIVE: Europe's Comgest Outlines Favorite US Stock Picks

Louis Citroën, portfolio manager of the Comgest Growth America Fund, discusses his top stock picks, focusing on a number of large US businesses. He believes that choosing a firm for its culture provides a competitive advantage.

In a recent interview, Louis Citroën at Paris-based growth investor Comgest highlighted the importance of investing in companies whose culture gives them a competitive advantage.

“Costco, a big US retailer that delivers good returns, for instance, has a unique warehouse club model that allows customers to buy food in large quantities and low prices,” Citroën told this news service in an exclusive interview. “It also pays its employees more than the typical rate, providing them with good benefits and training, which allows for a high level of staff retention,” he added.

Another top stock pick is JB Hunt, an Arkansas transportation and logistics company, which was “founded by a driver, for divers.” “It gives it a unique driver-centric culture, in an industry which has a chronic shortage of drivers. This focus on the wellbeing of drivers has given them a strong market share,” he said. Citroën believes that the firm has a lot of potential to grow bigger.

He also thinks that it’s important to invest in companies that have a good mix of established services and new cutting-edge ideas. “Avery Dennison, for instance, may seem like a standard label maker. Eighty per cent of its business is focused on producing clothing/packaging tags, but it is also developing ‘smart labels’ which can track merchandise through a store,” he said. “The combination of mature service lines and new ideas makes it a safer, steadier bet than pure concept stocks like Peloton while still offering the potential for strong growth,” he added.

Another top stock pick for Citroën is Oracle. "The stock does not regularly appear in the portfolios of growth managers, but Comgest believes the company is a strong investment with good growth prospects and that there is an element of groupthink in the way growth investors have shunned it,” he continued.

The firm has seen cloud infrastructure and cloud applications grow, in spite of decelerating IT budgets. It is also integrating its electronic health records acquisition (Cerner), emphasizing cost management while investing in R&D and capital expenditures, he said. Its partnership with Nvidia and investment in Cohere, an AI platform, position it as a leading provider for generative AI startups, he added. The cloud transformation thesis is playing out with next quarter's revenue growth guidance at 7 to 9 per cent (excluding foreign exchange impacts), a big acceleration compared with low-single-digit growth in the past.

Comgest Growth America Fund
Factoring in ESG criteria into the investment process is also important for Citroën, who is the portfolio manager of the Comgest Growth America Fund. It invests in a portfolio of high-quality, long-term growth companies. At least two-thirds of its assets are invested in securities issued by companies that have their headquarters, or principally carry out their activities, in America or in securities issued or guaranteed by the American government. The fund, which is aimed at investors with a long-term investment horizon of typically five years or more, has outperformed the index over a five-year period.

The fund invests substantially in IT, healthcare and industrials. US tech multinationals Microsoft and Apple feature in its top five holdings. Apple exceeded revenue expectations in the last quarter, fueled by a 2 per cent growth in iPhone sales in spite of currency headwinds and record-high services revenue. Emerging markets showed strong performance, and Apple is exploring investments in India and Vietnam, Citroën added.

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