RELX is also a publisher – a merger of British trade book and magazine publisher Reed International (founded in 1894) and Dutch scientific publisher Elsevier (founded 1880). Today it is a £43bn multi-national information and data analytics company.
Smiths Group is another world-leading British company founded in the 19th century. It has operations in more than 50 countries. It started out making precision watches for the Navy. That was cutting-edge technology of its time. And the business is still technology-driven. It makes airport security scanning equipment and sensors.
If we look at retail, Next has transformed itself in the past 10 years. It is much more than just a clothing retailer, with a strong online presence across an expanded offering in homeware, beauty and third-party brands. It is starting to turn its own cost base into a revenue opportunity by acting as a platform for other businesses, helping them with the front-end and back-end challenges of marketing and distribution. How many understand just how Next has transformed the scale of opportunity in this way? Its offering is increasingly evolving into a multi-channel platform like Zalando. The valuations? Next is on a P/E of 13x, compared with 60x for Zalando.
It is a similar story with enterprise software company Sage. It provides accounting and other associated services to smaller businesses but has become a very big business in the process, with a market cap of more than £7bn. Its US equivalent is probably Intuit. Intuit trades on a P/E of 78; Sage on 27.
Marketeers often talk about a company’s 'TAM' – its total addressable market. These digitally savvy companies have embraced tech to open up huge market opportunities. They are addressing them smartly and profitably.
Yes, the largest companies still dominate the corridors of the FTSE 100 and while many of them may still be worthy enough investments, they are arguably more adult than adolescent in their life cycle. That’s what you get most of if you go passive. Choose a good active UK manager instead and you can gain exposure to a broad range of the more exciting companies – and on attractive valuations next to those of their US peers.
Andy Marsh works alongside Adrian Frost and Nick Shenton as part of Artemis’ income team
