One of my favourite ways to discover new ‘hot’ shares is to scour high-performing managers’ portfolios to see what they hold (or held) and therefore what they think could be an opportunity.
Some listed investment companies (LICs) release monthly reports about their performance and holdings. One of those high-performing LICs is NAOS Absolute Opportunities Co Ltd (ASX: NAC), its portfolio has returned an average of 20.54% per year over the past three years.
One of the largest contributions to that performance has been Moelis Australia Ltd (ASX: MOE). Moelis is a financial services group that operates three divisions. Its three segments are corporate advisory, equities and asset management.
Since its establishment in 2009 Moelis Australia has advised on corporation transactions worth over $75 billion, raised more than $6.1 billion in capital for clients and manages assets worth more than $2.8 billion.
One of its best deals was buying the Redcape Hotel Group for $677 million last year and raising more capital to grow the business.
Moelis’ share price has more than doubled over the past year and there could be plenty more growth to come. It recently upgraded its full-year earnings before interest, tax, depreciation and amortisation (EBITDA) by 15% to at least $38 million on underlying revenue that is expected to exceed $100 million.
I like Moelis’ way of doing things and it’s not afraid to go for a long-term, unpopular choice. For example, it recently took almost a 10% stake in Japara Healthcare Ltd (ASX: JHC). This should provide the business with good dividend income and perhaps good long-term growth as well.
Moelis might not be to some investors’ liking, but I think it could be a market-beater because of the deals it can create that simply aren’t available to most other investment businesses.
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Motley Fool contributor Tristan Harrison owns shares of JAPARA DEF SET. The Motley Fool Australia has no position in any of the stocks mentioned. We Fools may not all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors. The Motley Fool has a disclosure policy. This article contains general investment advice only (under AFSL 400691). Authorised by Bruce Jackson.