Register For Our Mailing List

Register to receive our free weekly newsletter including editorials.

Home / 303

Boring can be beautiful when investing

Buying the hottest stock in the hottest industry can be a dangerous game in investing. Valuations and expectations are typically very high, and many an investor has been burnt by purchasing a fashionable stock too late in the cycle. For example, tech darling Tesla is now 30% off its high following a stellar run through to 2017.

Often the best opportunities come from boring industries, which don’t generate much ‘buzz’ but quietly build something special. Sir James Dyson became rich in vacuum cleaners, becoming a household name in a low-growth industry where competition and innovation was previously low.

Overlooked not overcooked

If you can find the right company in an overlooked industry, returns can be exponential. Earnings exceed expectations and the valuation multiple applied to those earnings increases as investors appreciate the better than expected outlook. It’s a double kicker to investment returns.

The table below shows some recent examples of winners operating in boring, low-growth industries that have performed exceptionally well over the last 12 months.

Recent winners

CompanyCode12 month returnIndustry
SpicersSRS110%Paper products distribution
InfomediaIFM90%Auto dealership software
Vista GroupVGL70%Cinema software
Breville GroupBRG60%Kitchen appliances

Spicers distributes paper-based products and has been negatively impacted by the move to paperless communication. Along with capital structure issues the stock did little for seven years. However, the industry has consolidated, Spicers had net tangible assets well above the share price, undertook a successful turnaround and then received a takeover offer.

Infomedia is a global provider of software to the parts and service sector of the automotive industry. The automotive sector is mature, making costs an increasing focus. Yet Infomedia has grown by improving its customer efficiency and adding significant value.

Vista is the leading provider of software to cinema operators globally, which is currently being challenged by streaming providers like Netflix. However, cinema attendances globally are moderately growing, and Vista has delivered five consecutive years of revenue growth above 20%. An exciting new marketing opportunity is also beginning to scale.

Breville has developed an innovative and appealing range of kitchen appliances like toasters and kettles. Hardly exciting. Yet it is expanding globally, broadening the product range and recently reported earnings per share growth of 20%.

What are some new ideas on this theme?

What are some other 'boring' industries which offer investment opportunities? The table below shows some new ideas that we like among stocks in industries which may be considered unfashionable.

New ideas

CompanyCodePriceIndustry
EQT HoldingsEQT$26.80Trustee services
GTNGTN$1.30Radio advertising
Ive GroupIGL$2.23Printing

EQT provides trustee services for individuals and corporates. It’s considered a relatively stable industry. Existing customers are unlikely to leave but it’s also hard to win new customers. New management has reinvigorated the business and earnings growth is accelerating. The recent Financial Services Royal Commission is likely to be significantly beneficial as greater importance is placed on external, independent trustees like EQT.

GTN has a near monopoly providing real-time traffic information to radio stations and sells attached advertising. It was sold down heavily after a downgrade in December 2018, but we understand those issues have now been resolved. It is about to benefit from accelerating earnings growth in Canada and Brazil and trades on an FY20 PE of 9x and yields 9%. Only a little needs to go right for investment returns to be large.

Ive Group is a printing and marketing company. The industry is challenged, but recently consolidated, and is increasingly rational. IGL just completed a capex programme and is about to reap the returns. Trading on a free cashflow yield of c. 20%, shareholders should benefit from higher dividends and value-accretive acquisitions.

Sometimes, frogs do turn into princes.

 

Richard Ivers is Portfolio Manager of the Prime Value Emerging Opportunities Fund, a concentrated fund which invests in companies outside the S&P/ASX100. This article is general information and does not consider the circumstances of any investor.

  •   24 April 2019
  •      
  •   

 

Leave a Comment:

RELATED ARTICLES

Why caution is needed in Aussie small companies

Europe is back and small caps there offer significant opportunities

How to unlock the big opportunity in misunderstood small caps

banner

Most viewed in recent weeks

Retirement income expectations hit new highs

Younger Australians think they’ll need $100k a year in retirement - nearly double what current retirees spend. Expectations are rising fast, but are they realistic or just another case of lifestyle inflation?

Four best-ever charts for every adviser and investor

In any year since 1875, if you'd invested in the ASX, turned away and come back eight years later, your average return would be 120% with no negative periods. It's just one of the must-have stats that all investors should know.

Why super returns may be heading lower

Five mega trends point to risks of a more inflation prone and lower growth environment. This, along with rich market valuations, should constrain medium term superannuation returns to around 5% per annum.

The hidden property empire of Australia’s politicians

With rising home prices and falling affordability, political leaders preach reform. But asset disclosures show many are heavily invested in property - raising doubts about whose interests housing policy really protects.

Preparing for aged care

Whether for yourself or a family member, it’s never too early to start thinking about aged care. This looks at the best ways to plan ahead, as well as the changes coming to aged care from November 1 this year.

Our experts on Jim Chalmers' super tax backdown

Labor has caved to pressure on key parts of the Division 296 tax, though also added some important nuances. Here are six experts’ views on the changes and what they mean for you.        

Latest Updates

A speech from the Prime Minister on fixing housing

“Fellow Australians, I want to address our most pressing national issue: housing. For too long, governments have tiptoed around problems from escalating prices, but for the sake of our younger generations, that stops today.”        

Taxation

Family trusts: Are they still worth it?

Family trusts remain a core structure for wealth management, but rising ATO scrutiny and complex compliance raise questions about their ongoing value. Are the benefits still worth the administrative burden?

Exchange traded products

Multiple ways to win

Both active and passive investing can work, but active investment doesn’t in the way it is practised by many fund managers and passive investing doesn’t work in the way most end investors practise it. Here’s a better way.

Economy

The Future Fund may become a 'bad bank' for problem home loans

The Future Fund says it will not be paying defined benefit pensions until at least 2033 - raising as many questions as answers. This points to an increasingly uncertain future for Australia's sovereign wealth fund.

Investment strategies

Managed accounts and the future of portfolio construction

With $233 billion under management, managed accounts are evolving into diversified, transparent, and liquid investment frameworks. The rise of ETFs and private markets marks a shift in portfolio design and discipline. 

Property

Commercial property prospects are looking up

Commercial property is seeing the same supply issues as the residential market. Given the chronic undersupply and a recent pickup in demand, it bodes well for an upturn in commercial real estate prices.

Infrastructure

Private toll roads need a shake-up

Privatised toll roads in Australia help governments avoid upfront costs but often push financial risks onto taxpayers while creating monopolies and unfair toll burdens for commuters and businesses.

Sponsors

Alliances

© 2025 Morningstar, Inc. All rights reserved.

Disclaimer
The data, research and opinions provided here are for information purposes; are not an offer to buy or sell a security; and are not warranted to be correct, complete or accurate. Morningstar, its affiliates, and third-party content providers are not responsible for any investment decisions, damages or losses resulting from, or related to, the data and analyses or their use. To the extent any content is general advice, it has been prepared for clients of Morningstar Australasia Pty Ltd (ABN: 95 090 665 544, AFSL: 240892), without reference to your financial objectives, situation or needs. For more information refer to our Financial Services Guide. You should consider the advice in light of these matters and if applicable, the relevant Product Disclosure Statement before making any decision to invest. Past performance does not necessarily indicate a financial product’s future performance. To obtain advice tailored to your situation, contact a professional financial adviser. Articles are current as at date of publication.
This website contains information and opinions provided by third parties. Inclusion of this information does not necessarily represent Morningstar’s positions, strategies or opinions and should not be considered an endorsement by Morningstar.