If Fred and I had to describe what traits our dream investment would consist of, it would need to have some important characteristics.

Firstly, it would have a strong brand, either through the eyes of its consumers or customers. It would have a strong proportion of market share in the industry it operates in. A proven management team, operating a strong balance sheet (in a perfect world, cash-laden). A conscience in an environmental, social and governmental way. It would generate strong future recurring revenues, with a high return on capital employed. And, finally, the shares would represent fair value – we cannot expect a company of this quality to be cheap!

Every fund manager dreams of finding their utopian investment and it can be a painstaking task. However, a great sector to start in is platform businesses. Essentially, platform businesses operate a model where they create value by facilitating exchanges between two or more interdependent groups - consumers and producers/providers. We all use them: Uber connects us to drivers through its app; Airbnb connects us to holiday cottages by the beach in Cornwall via its website; and Amazon.com, the third biggest listed company of them all, is a platform business.

What is so strong about platform businesses is that they operate across every industry and every region. In the UK, we have managed to pick up three businesses that we have long-admired, but patiently waited for as they came back to fair value during the March Coronavirus crisis: Auto Trader Group, Trainline.com and IntergraFin Holdings.

Auto Trader is the UK’s leading online automobile marketplace. Most probably remember it for its printed magazine and classifieds, but management cannily axed the printed business in 2013 and focused entirely on its online platform, which launched in 1996. It has an 85% market share and, with that, unparalleled distribution and buying power. Over the past 10 years it has grown +9% annually and has a ROCE over 60%. We were able to buy stock 39% off its peak share price.

Trainline.com is the UK’s leading online rail ticketing e-platform, which also operates in Europe, where an exciting opportunity lies. It only listed in 2019, but commands high revenue growth, strong cash conversion and low debt. COVID-19 has clearly had a seriously detrimental effect on sales, but liquidity looks manageable due to low cash burn. The shares were hit hard in March and we bought them at 64% off their peak share price.

Finally, IntergraFin primarily operates the Transact fund buyers platform, which links asset management businesses with advisers to buy/sell their funds on a centralised platform. AJ Bell and Hargreaves Lansdown are their leading peers in the retail landscape. They are a market leader with strong adviser loyalty and an adjusted operating profit margin of almost 50%.

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