10 Companies I Might Buy If I Won The Euromillions Jackpot

Published in Investing on 17 September 2012

A recent Euromillions jackpot winner scooped £148m. That's more than the entire market cap of some great companies.

Warren Buffett is probably the world's greatest living investor. Sometimes, when he likes a stock so much, he buys the entire company. This is the exact strategy I would pursue if I won the Euromillions jackpot. There'd be no popping champagne for the cameras while holding an oversized cheque; I would be straight on the phone to company executives and making offers.

Below, I've picked out some companies I would be very happy to own outright that are currently priced at less than a big Euromillions win. To make up the full 10, I've included some larger companies I would seek a large stake in. While there might be other shares on the market today that I believe offer better value, these are the companies I would feel most comfortable being owner of.

Here are my 10.

CompanyP/E (historic, %)Yield (historic, %)Market cap ( £m)
SABMiller (LSE: SAB)20.92.143,020
IG Group (LSE: IGG)12.54.81,700
SOCO International (LSE: SIA)20.501,100
Sportingbet (LSE: SBT)7.93.9292
Novae (LSE: NVA)N/A*4.8240
Brooks Macdonald (LSE: BRK)22.01.5139
FW Thorpe (LSE: TFW)15.11.6127
First Derivatives (LSE: FDP)15.52.479
Wynnstay Group (LSE: WYN)12.92.067
GOALS Soccer Centres (LSE: GOAL)9.11.558

* previously loss-making

I think that four of these deserve further comment.

1) GOALS Soccer Centres

GOALS Soccer Centres is a manager of outdoor five-a-side football centres. GOALS is one of AIM's most successful companies; the company has never cut its shareholder dividend. Today, the payout is more than three times the level that it was in 2006.

GOALS shareholders recently rejected a takeover offer from a Canadian pension fund. This was priced at 144p per share, valuing GOALS at £73m.

GOALS has enjoyed great success in the last six years. Annual sales have increased from £16m to £30.4m; earnings per share (eps) has grown similarly. With GOALS' first US site now trading profitably, further growth is possible. Given that fact, it is not surprising that shareholders declined an offer that amounted to only 10.8 times 2011 earnings.

The shares have fallen since the takeover was rejected. GOALS today trades on a 2012 P/E of just 8.7. This falls to 7.8 times consensus 2013 estimates.

GOALS will announce interim results on 28 September.

2) Novae

Novae is a non-life insurer. One of the best things about investing in this sector is the lack of correlation with other shares. Provided an insurer is well run, with a keen eye on underwriting risk, then dividends can be large and reliable. The problem is that large losses can come out of a clear blue sky.

I've successfully invested in Novae twice before. My strategy has been simple: buy at a large discount to net tangible asset value.

The insurance market is cyclical in nature. A few years of good underwriting returns attracts competitors. This flow of capital reduces premium rates. Lower margins mean companies are more exposed to losses. When capital is withdrawn from the market, rates move upward as insurers can name their price.

Novae has been increasing its dividend for the last five years. At the interim stage, the company reported net tangible assets of 428p. While this is less than the usual discount I require, the income makes the shares a good store of wealth.

3) First Derivatives

First Derivatives already has one shareholder with a massive stake in the company. Founder and CEO Brian Conlon owns 46.5% of the financial software specialist.

First Derivatives is an exceptional company. Along with having a CEO with so much skin in the game, First Derivatives is one of just four Northern Irish companies that is listed on the London Stock Exchange. On top of this, First Derivatives has enjoyed exceptional growth. In the last five years, sales at the company have increased at a compound average growth rate of 37.5% per annum. At a rate of 16.2% per annum, eps has similarly increased . The shareholder dividend is now 10 times the size it was eight years ago.

To cap it, further growth is expected. This means that today, First Derivatives shares trade on a forward P/E of 11.7 times the 2013 consensus estimate, falling to 10.1 times the 2014 figure.

4) Brooks Macdonald

In five years Brooks Macdonald shares have advanced from 288p to 1,305p today. This is in contrast to its peers in the asset management sector.

Brooks has ensured its shareholders have been rewarded by the business' progress. The company has increased its shareholder dividend every year since 2005: from 1p then to 18.5p per share in 2012.

Brooks Macdonald provides a range of professional financial services. Brooks Macdonald operates fund management offering, employee benefits, financial consulting and estate management. In the most recent results, funds under management increased 47% (helped by market rises) and property assets increased 15%. While management sounded some caution over the impact of the Retail Distribution Review, Brooks Macdonald still has the look of a growing business.

Consensus forecast is for eps to rise 25.0% in 2013, to be followed by another large rise the year after. The dividend is expected to follow a similar trajectory.

The truth is I am unlikely to win the Euromillions. In the case, I'm going to need an alternative strategy to build my wealth. The Motley Fool has a free report that details how the stock market can help. "10 Steps To Making A Million In The Market" explains how you can grow your investments through investing in shares. The report is 100% free and will be delivered to your inbox immediately.

David Kuo challenged his Motley Fool analysts to pinpoint the attractive sectors of 2012 -- and they delivered! Discover the industries they selected in this new Motley Fool guide -- "Top Sectors Of 2012" -- while it's still free!

Further investment opportunities:

> David owns shares in Sportingbet and SOCO International. The Motley Fool owns shares in FW Thorpe.

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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.

snoekie 17 Sep 2012 , 4:29pm

I have read that SAB Miller has a market cap of $63 billion odd, Reuters shows it as £43,143.37 mill and their pay out in dividends is in the billions. Methinks that the lottery wins are going to have to grow a helluva lot to be able to buy it outright!

Another thought, Lonrho, recently in profit after years of losses, no dividends paid since '98, and they have extended their profits for this year, market cap £129 mill.

I was looking at SAB some time ago when they were around £11, didn't have enough for a decent holding (1000), and how wrong was I.

Rather than owning one company outright and fretting about what they are doing, I would do a spread of companies, at 50-60 of them, and that would equate to more than £2 mill per holding and leave change for some decent value properties and 'toys', money for the kids/grand kids and a sizable rainy day set aside.

The other problem is how to spend/invest the sizable income surplus to day to day needs. Some charities would do well, but without incurring the inevitable junk mail if you contributed in your own name (they share their lists).

mackeson29 18 Sep 2012 , 9:23am

The only company I would 'buy' would probably be one of the mothballed distilleries in scotland & re-open it. My own single malt.....

dejw 18 Sep 2012 , 12:51pm

Tut tut MF editors!

The column for the market cap should be right justified, not left justified.

This mistake is not worthy of first year business school students, please get it correct next time.

However, a very interesting article and good comments.


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