In December UK inflation breached 30-year highs of 5.4%, putting pressure on investors to make higher returns or risk losing money in real terms. With low bond yields and savings accounts paying near 0% interest, higher-risk investments such as stocks have been the logical choice. But volatile markets have not made it easy to decipher which stocks to own and which to avoid. One of the ways savers can preserve their purchasing power is by investing in companies geared to wider economic growth or those that are able to pass-on rising costs.
Laurence Hulse, co-manager of the LF Gresham House UK Smaller Companies fund, picked Ten Entertainment Group, an operator of ten-pin bowling venues.
He said the management team had proven adept at managing input cost inflation over the past year – particularly labour costs, which they have combated through incentivisation of staff.
“Even more impressive has been the investment into digital pricing mechanisms and overhauling the CRM during lockdown. Along with the strong market position, this is allowing the group to recover any unavoidable inflation,” he said.
In addition to its ability to manage inflation, he also said there are further drivers of upside for the company.
“It is ideally placed to capture growth in the ‘experiential leisure’ trend through refurbishment and improved use of technology to drive footfall, and it continues to roll out new sites at a rate of three to four new venues every year,” he said.