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Star investor Terry Smith develops a taste for Wingstop

David Brenchley Sunday August 15 2021, 12.01am, The Sunday Times

A fast-food chain that specialises in chicken wings and a rapidly growing pest-control business are the latest stocks to form part of the giant investment trust overseen by the star fund manager Terry Smith.

Smithson investment trust, which is managed by Simon Barnard and is part of Smith’s Fundsmith empire, has stakes in the US companies Wingstop and Rollins.

Wingstop is a fast-growing chain that specialises in Buffalo-style chicken wings and began in Texas in 1994. It works on a franchise model and has more than 1,500 restaurants in South America, Asia, the UAE, France and the UK. Franchisees typically generate 70 per cent returns on their investments in three years, meaning demand for new shops is “enormous”.

Sales at the pest-control company Rollins have grown by 3 per cent a year, but its overall business has grown by 9 per cent as it has snapped up other companies…

The investment trust returned 4.1 per cent in the six months to June 30, well below the 12.4 per cent gain from its MSCI World Small and Mid Cap index comparator.

Barnard said that the main reason was that markets were starting to believe that inflation, which has risen this year, would accelerate. This would benefit companies that have low share prices rather than high-quality companies that have seen solid growth in recent years.

A second reason given for the underperformance was the strong growth that economies are experiencing…

Since June 10 Smithson is up by 10 per cent compared with the MSCI World Small and Mid Cap index’s 2.6 per cent.

James Carthew, the head of investment company research at QuotedData, said that whether investors agreed that the switch from growth to value in the first half of 2021 was a short-term phenomenon depended on how strong they thought economies would be over the next 12 months.

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