Stock of the week: Melrose Industries

Written by:
Ian Forrest, investment research analyst at The Share Centre, picks industrial engineering company Melrose Industries as stock of the week.

We have long been fans of Melrose Industries’ strategy of buying businesses that are underperforming to improve and eventually sell on. Management have many years’ experience and an excellent track record of improving businesses it has acquired. This was demonstrated by the purchase of Elster in 2012 for £1.8bn which is the company sold for £3.3bn in 2015.

The group’s latest acquisition, US group Nortek, a manufacturer of cooling and heating systems was acquired in 2016 for $1.44bn. This deal gears the group to the US housing market, where Nortek sells the majority of its products too. Management saw potential for improving its performance by refocusing its product range, overhauling the supply chain, debt structure and back office, leading to improved margins. Interested investors should note that Nortek’s performance is exceeding expectations and its prospects are better than originally thought.

In August, the firm reported a rise in interim pre-tax profit from £6.2m to £131.1m with sales of £1.09bn. Investors will be interested to know that management stated they remain on track with planned improvements at Nortek. They also reiterated that the search for the next acquisition is ongoing.

We are happy to recommend Melrose Industries as a ‘buy’ for the chance of further long-term growth and cash returns. This stock is suitable for those seeking a medium level of risk with a balanced portfolio.

Related Posts

There are 0 Comment(s)

If you wish to comment without signing in, click your cursor in the top box and tick the 'Sign in as a guest' box at the bottom.

The savings accounts paying the most interest

It’s time to get your finances in shape, and moving your cash savings to a higher paying deal is a good plac...

Everything you need to know about being furloughed

Few people had heard of ‘furlough’ before March 2020, but the coronavirus pandemic thrust the idea of bein...

The experts’ guide to sorting out your personal finances in 2021

From opting to ‘low spend’ months to imposing your own ‘cooling-off period’, industry experts reveal t...

What will happen if rates change

How your finances will be impacted by a rise in interest rates.

Regular Savings Calculator

Small regular contributions can build up nicely over time.

Online Savings Calculator

Work out how your online savings can build over time.

Having a baby and your finances: seven top tips

We’re guessing the Duchess of Cambridge won’t be fretting about maternity pay or whether she’ll still be...

Protecting family wealth: 10 tips for cutting inheritance tax

Inheritance tax - sometimes known as 'death tax' - can cause even more heartache for bereaved families. But th...

Travel insurance: Five tips to ensure a successful claim

Ahead of your summer holiday, it’s important to make sure you have the right level of travel cover or you co...

Money Tips of the Week