I tend to think that Robin Milway, manager of the Arbrook American equities Fund has taken on something of an thankless task. His relatively new fund aims to invest in a broad range of larger cap US equities, in a market widely perceived as being very liquid, and fairly efficient. His biggest competitor is probably a cheap, deeply liquid ETF tracker from the likes of Vanguard or iShares. Anyway, you can find out more about his fund HERE – https://citywire.co.uk/new-model-adviser/fund/skyline-arbrook-or-g10-am-eq-a3-fdr-usd-acc/c630872?periodMonths=12

As the table below shows, he’s done a more than passable job of beating this benchmark although that outperformance is not a complete slam dunk…then again, as I say, it’s a bloody hard benchmark to beat!

Anyway, I tend to keep an eye on Robin’s purchases, if only because he has a good track record of digging out smaller, faster growing businesses that are arguably mis priced by the wider market. His latest note zero’s in one candidate that I think we should all take some time to research. It’s a new name for me but seems an excellent thematic /secular trend play. The company is called Cubic and links to a wider idea within Robin’s portfolio strategy – established businesses which have latent strengths as they shift their product mix towards a new digital standard.

Here’s Robin Milway’s summary of Cubic:

“We believe Cubic is the largest supplier of payment systems to public transport networks globally by a large distance. The company has significant scale as the provider of the systems to major world cities such as London (Transport For London – TFL), New York (Metro Transit Authority – MTA), Boston, Chicago, Singapore, Brisbane & Sydney (Australia) and Vancouver (Canada). The company has a number of large contracts rolling on over the next couple of years which we believe will cement its leadership and provide an attractive recurring stream of revenue. Many of these new contracts are global cities finally catching up to the technology that TFL has had in place for years. This contactless technology (see image) was codeveloped between Cubic and TFL and is the basis for the global systems upgrades.

When we came across the stock idea Cubic was classified as an Aerospace & Defense company but over 70% of its operating profits derive from mass transportation. We believed this was hiding the stock from the view of many investors that would typically avoid Defense companies. We mentioned this to management earlier this year and subsequently Cubic has now been correctly classified as Transportation Systems in Bloomberg and FactSet6 – as we say, latency comes in many different forms and unlocking it in many different mechanisms! The stock has been hit during the Covid sell-off amid headlines of subway ridership numbers plummeting and local transport authorities under budget pressure, despite Cubic stating on numerous occasions that very little of their revenues derive from fare collections7 . We believe these payment systems are too important for the effective running of major world cities to be cancelled, especially as they are based on new contactless technologies which we believe will be even more important in a post-Covid world.”