Henrik Andersson of Didner & Gerge presented his in-depth investment thesis on Prudential plc (UK: PRU) at European Investing Summit 2019.
Prudential plc – not to be confused with Prudential Corp in the US – was founded in 1848, but is a constantly adapting and thriving 171-year old. It is a collection of best-in-class businesses directly exposed to the biggest global demographic trends; namely the ageing of the western world (accessed via retirement products in the UK & US) and the emerging middle class in Asia (accessed via protection and investment products). The company is extremely well capitalized and earns the highest returns in its peer-group. It is growing revenues, earnings and shareholder value the fastest of anyone, yet sits on a no-growth rubbish-business type of rating of 10x earnings and substantially below embedded value per share.
The last decade has indeed been an impressive one with a 10% CAGR in dividends, 12% embedded value per share growth and 14% growth in new business value in its Asian operations, accomplished without reckless borrowings or risky M&A. Even more impressive is the strength and likely durability of its market positions the company has built throughout the last 25 years especially. This leaves the company with a heady combination of secular growth prospects, double digit earnings growth and even higher dividend growth – something that could be deemed a “super-compounder” but without the nosebleed valuation commonly found in those names.
This month, Prudential – known as The Pru among most followers – is splitting itself in two. One company (Prudential Plc) focusing on its operations in Asia, the US and Africa. The other (M&G) entailing its businesses in the UK (UK Life and M&G). These sorts of corporate actions do not take place lightly at The Pru, but will hopefully prove to be a good move when we look back 171 years from now.
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About the instructor:
Henrik Andersson has worked within a framework of investing in quality franchises in a concentrated portfolio setting since the early 2000s. After five years as an assistant fund manager and analyst at Handelsbanken Asset Management, in 2003 he launched a discretionary portfolio named European Quality with 15 holdings, inspired by Peter Cundill’s approach of “never shoot into the broom”. That later branched out to a family of funds named the Selective Funds. In 2011 he joined Didner & Gerge, an employee-owned asset management boutique, to launch a Global Equity Fund together with a colleague. D&G Global is now applying these same principles in trying to identify sustainably great companies with an appealing valuation starting point. Over the years, an increased emphasis has been put on corporate leadership with a clear preference for owner-operated companies with a history of outstanding operations.