Premium content from Motley Fool Hidden winners from the UK

Our monthly “Best Buys Now” aims to highlight three of our team’s favorite and hottest buys from our growing list of small-cap recommendations to support Fools build their stock portfolios.

Why we like it: “Polar capital (LSE: POLR) is a London-based fund management company with assets under management (AuM) of £23.8 billion as of December 2024. While the investment management space often gets a bad rap – given that it charges high fees to needy performers – we have no problem recommending asset managers with a long-term, foolhardy investing style, and we believe Polar’s focus on technology and healthcare is attractive.

“One of the attractions of fund management companies is that they have enormous operating leverage. Revenues tend to grow at a rate proportional to AuM, although costs remain the same, so profits should grow faster. In good times, when markets are rising and revenues are rising, company profits should grow even faster, potentially making business ownership a marker of market progress.”

Why we like it Now: Over the last nine months, Polar Capital’s AuM has grown from £19.2 billion to £23.8 billion, an augment of 9%. The company recorded modest net inflows of £0.2 billion and an augment of £1.8 billion on market and investment performance. This is a highly credible result when compared to other UK asset managers that have seen outflows over the same period. Potentially, if Polar’s technology and healthcare investment mindset continues to deliver robust performance, it should support attract more investors to its funds. Despite the company’s performance placing it at the top of its peer group, its earnings are trading at just under 10 times expected earnings, and its projected yield of 9.5% is worth considering for income investors.