Aegon Asset Management’s Audrey Ryan highlights three recent ‘sustainable improver’ stock additions to the Aegon Sustainable Equity and Global Sustainable Equity Funds.
“There is a strong tilt towards small to medium growth within our sustainable equity portfolios and we believe the reason to invest in improving companies in this bracket is twofold,” says Ryan, support manager on the funds. “Firstly, supporting sustainable-product-led companies early in their growth is the right thing to do, and secondly, identifying tomorrow’s leaders today is a great potential source of generating alpha.”
“The world’s largest independent consumer review website launched its UK IPO in March, of which we took a position. The business operates a ‘freemium model’ which involves consumers sharing their experience and feedback. This is monetised by Trustpilot through selling subscriptions to businesses allowing them to promote the data and also offering marketing and analytical data from the reviews. The use of the Trustpilot logo and scoring system can be a very powerful advertising technique for businesses and also offers the opportunity for SMEs to compete with larger corporates based on the quality of service.
“We believe the company has key sustainability benefits, notably strong product characteristics, acting as a source of truth, trust and consumer protection by allowing greater transparency and attractive fundamentals. It also has first mover advantage and a significant ‘network’ effect benefits from the dual-sided ecosystem of reviews with integrity.
“From a Fund strategy perspective too, the business is aligned to structural growth themes we like such as e-commerce, digital marketing and digitalisation. From a social perspective, it is a founder-led business with strong diversity credentials.
“Moving forward, we see a significant runway for Trustpilot’s scalable and sustainable growth, with the opportunity for it to replicate the success from their Danish roots in other countries including the UK, other parts of Europe and the US. The economics for the business should continue to improve as penetration grows and the customer base matures. The company released a corporate update on 15 September, which outlined Q2 performance and management’s views on future growth prospects.”
“In a world where modern IT applications are run with increasing complexity across a range of hardware and through various operating systems it is vital that businesses carefully monitor and analyse those applications which are often business critical.
“With increasing volumes of data typically within enterprises, Dynatrace’s product allows engineers to monitor performance and helps present solutions to potential challenges. Their solutions allow businesses not only to be more efficient and productive but also to improve the customer experience and strengthen business resilience, often helping avoid costly disruptions and outages and enabling more flexible working.
“We believe that the fundamentals of the business are strong and improving with digital transformation accelerating as enterprises move to more complex, hybrid on-premise (combining cloud with some on-site data to balance work streams) and multi-cloud environments. Dynatrace is benefitting from both this strong market growth and market share gains.
“Another point of note and a key point of competitive differentiation is their use of AI and automation which allows both ease of deployment and them to be better equipped to deal with complexity. They are also launching a new security product which increases their target addressable market and provides an opportunity for future incremental revenues.
“We see Dynatrace as an exciting business with scope for revenue forecast upgrades and a re-rating potential on improving sentiment to the product category and their positioning within it.”
“Eurofins is a global provider of bio-testing and analytical services. With 900 lab’s covering 50 countries, the company performs more than 450 million tests per year in areas including areas such as food, environmental, clinical diagnostics and pharmaceuticals.
“The company play to the increasing need and demand for a healthier life and a safer environment with testing an efficient and cost-effective way to prevent risks such as making our food safer, water cleaner or improved medical outcomes. Eurofins have also played a part in the recent Covid-19 vaccine development and testing procedures.
“We believe Eurofins is an attractive, long term secular growth business, with a positive product impact that can continue to benefit from regulatory drivers, sustainability and new innovations.”