The American bull market should be understood as more than just the successes of the Magnificent Seven, fund manager Richard De Lisle has argued, pointing to small success stories such as Build-A-Bear.
De Lisle, who manages the £329m VT De Lisle America fund, focuses on smaller companies and away from tech, and prides himself on finding “cheap little growth stocks”.
While the so-called Magnificent Seven of Apple, Amazon, Alphabet, Meta, Microsoft, Nvidia and Tesla saw their stock prices double in 2023, the manager was eager to note that all areas of the American market had been growing.
He stated that in the fund’s target universe of 170 stocks, over 50 had increased more than 50 per cent in the last year, distributed across all sectors.
High interest rates and a fear of recession have kept smaller companies in the US low, but moving beyond the “cult following” of the top tech stocks still allowed you to find some diamonds in the rough, De Lisle argued.
Build-A-Bear is one of the stars of the manager’s portfolio, sitting as his third biggest holding at three per cent. It has seen its stock price almost quadruple in the last five years, and is up 29 per cent since the start of 2024.
However, he argued that the stock was still “cheap”, noting its price-to-earnings ratio of just 6.5, compared to an S&P 500 average of 28.4.
New international expansion for Build-A-Bear, such as a recently opened shop right next to the Trevi Fountain, has allowed it to capitalise on the tourist market as well.
Another key area of the market to watch for has been housing, as a crisis in supply and high interest rates have pushed Americans towards new builds.
While house builders are an obvious method to capitalise on this, De Lisle was eager to invest in “every aspect of the housing market” and focused on kitchen cabinet manufacturers.
Masterbrand is the newest entrant to the market, listing at the end of 2022, and is up 88.6 per cent since then.
Making “the sort of kitchen cabinets you buy in John Lewis”, De Lisle was bullish on the stock, seeing its potential to become essential to new builds across the US.
Petrol station chain Murphy USA is another new favourite of the manager’s right now, though he admitted he had wrongly sold out of it a decade ago.
“I bought this one at $33, sold at $55, and I bought it back at $360,” said De Lisle. The stock is currently sitting at $414, up 65.3 per cent in the last year.
Now, the stock has gone “cheap again” De Lisle argued, and he was hoping to just “put it away” and allow the business to continue to grow, rather than repeat previous mistakes and sell early.