A Millionaire Investor's Top 5 Shares

Published in Investing on 8 December 2011

FT columnist John Lee reveals his largest shareholdings.

John Lee is a member of the House of Lords and a popular investment columnist. He is a former government minister, too.

John is a hero to many private investors in the UK. By tucking money away year after year, and choosing his investments wisely, he has accumulated a portfolio worth more than £1 million.

Lord Lee aims to invest in established, profitable, dividend-paying companies with a long-term view. He is a value investor at heart, searching for modest valuations with the conviction that real value always comes through in the end. So what are the five companies John has more of his money in than any others?

1. PZ Cussons 

PZ Cussons (LSE: PZC) is a company you may not have heard of, but you might possibly use one of its products every day. Its most famous brand is Imperial Leather but the company also makes Carex handwash, Original Source shower gels and Morning Fresh washing-up liquid.

PZ Cussons is a member of an elite group of UK-listed companies that have increased their dividends every year for more than 25 years. In the last five years alone, PZ's dividend has been raised an average 11% per annum. One of the cornerstones of this success is PZ's incredibly strong position in the Nigerian market, which can be traced back to the days of the empire.

With a market capitalisation of more than £1 billion, PZ is one of the larger companies in the FTSE 250. However, a statement this morning owned up to profits running below expectations, and the shares dropped more than 10% in early trade. So perhaps John may now have a fresh opportunity to capture that illustrious dividend at a cheaper price.

2. Treatt 

If you've never heard of PZ Cussons, it's a decent bet you will know nothing about Treatt (LSE: TET) or what the firm does. Treatt is a chemicals company that can trace its history back to the late nineteenth century and today makes many of the chemical ingredients used in air fresheners, shampoos and foods.

Treatt has done this from its Bury St. Edmunds HQ to great success: sales and dividends have increased in each of the last five years. What's more, the company's recent results showed another rise in profits and an 11.5% lift to the final dividend. This was tempered however by a more negative outlook for 2012, which caused the shares to fall on the day.

Treatt is a far smaller company than PZ Cussons, with a market cap around £35m.

3. Nichols 

Most people have never heard of Nichols (LSE: NICL), but everyone knows their best-selling product, Vimto. Despite the recession, Nichols has delivered profit and dividend growth every year for the last five years. Much of this growth can be attributed to the success of Vimto in Africa, where Nichols has regularly reported sales growth in double digits. Vimto also does very well in the Middle East, where it is a popular source of refreshment during Ramadan.

Nichols' last interim announcement carried the kind of news every investor loves to see: sales, profit and the dividend all increased by more than 10%, all supported by a net cash position (of £14m). Nichols has a market capitalisation of £200m and the shares are traded on AIM.

4. Christie 

At a value of just £17m, Christie (LSE: CTG) is the smallest of Lord Lee's top five. The company is traded on AIM and its sales are split approximately 50:50 between two divisions: professional services (mostly estate agency and financial services to businesses) and an inventory management division that sells software to some of the biggest retail chains in Europe.

It is this second division that excites me the most. In the company's most recent results, the division reported a rise in operating profits from £0.4m to £0.9m thanks to just an 18% increase in sales.

Christie looks to be the black sheep of John Lee's biggest investments. You see, the company reported losses in 2008 and 2009 and reinstated its dividend to shareholders in 2011 after a two-year absence.

It would be interesting to see how profitably Christie could trade should the UK property market recover. In 2006, Christie made a £4.1m post-tax profit and followed that up the next year with £4.6m. However, 'if there is a recovery' is an argument that applies to lots of investments available today and the fact the recession forced Christie into a sharp loss might hold back any future re-rating.

5. Smiths News 

Smiths News (LSE: NWS) is another company with a five-year record of increasing dividends. The group distributes newspapers and magazines to shops and supermarkets, mostly in the south east, and the nature of the firm's contracts ought to bring a high degree of assurance over future earnings. Smiths also owns Bertrams, a book wholesaler to both bricks-and-mortar shops and the online giants.

Though there are some concerns about the long-term future of newspaper and book sales in the UK, Smiths has a very strong position in its markets, making it very difficult for anyone to compete. The company has enviable track record and dividend, which at today's share price put ths shares on a yield of almost 10%.

Summary

John Lee's share selections reveal an investor that prioritises dividend-paying enterprises with a solid history, hoping he can protect the downside and letting the dividends flow. Any remarks on John's top five shares -- or further ideas for his portfolio -- can be submitted in the comment box, below.

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Comments

The opinions expressed here are those of the individual writers and are not representative of The Motley Fool. If you spot any comments that are unsuitable hit the flag to alert our moderators.

paullidd 08 Dec 2011 , 9:40am

Hi David,

How does He hold AIM shares in his ISA are they listed elsewhere, or were the rules different for PEP, TESSA.

QuantumDealer 08 Dec 2011 , 9:56am

It looks like PZ Cussons just dropped the Imperial Leather in the jailhouse shower!! Profits warning - "OUCH!"

MaynardPaton 08 Dec 2011 , 11:05am

Hello Paulidd
Nobody can buy AIM shares in an ISA, and am pretty sure they could not be held in PEPs/Tessas as well. I had to change the original text to avoid this confusion and will change it again -- I only left the ISA bit in at the start as John Lee wrote a famous article for the FT years ago that revealed how he made a million using the tax shelter.
Mayn

QuantumDealer 08 Dec 2011 , 3:03pm

Who actually buys Imperial Leather these days? They are, quite literally, 'a dying breed'...

Mark878 08 Dec 2011 , 3:19pm

You can buy AIM shares in an ISA if they are dual listed on another recognised stock market

Zipmanpeter 09 Dec 2011 , 6:09pm

John Lee writes of "PZ's incredibly strong position in the Nigerian market" .....beware - Nigeria (and many other African markets) are changing faster than many of the companies that grew in them. As they open up and the MNC enter, it is easy for the old guard to end up on the wrong side of history.

Witness Ariel detergent (P&G) has replaced Elephant(PZ) but Omo(Unilever) was able to adapt.

jaizan 10 Dec 2011 , 3:52am

Imperial Leather and Cussons branded soap crop up regularly in Asian hotel rooms.
Remarkable, considering any Chinese company could probably knock out cheap soap & put a fancy label on it.
Maybe PZ Cussons just know how to run their business properly?

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