MR MONEY MAKER: Ricardo is an attractive opportunity, but can an old company learn new tricks?
Ricardo is a great engineering name that has been around since the days of the Kaiser, when an engineer called Mr Ricardo advised the military on how to improve these new ‘tank’ things.
Since then, it has built a glorious record of engineering developments in all sorts of areas but has never been able to catch the imagination of investors.
As a history of great engineering it appears a treasure trove, but somehow, no matter how clever or classy the areas it was involved in, such as Bugatti, the company never caught the right wave of enthusiasm.
On the move: Ricardo’s share price performance over five years has been dreadful, falling from just over £10 in 2016 to £3.10 in August last year, but since then it has come up a bit
Why Does It Matter?
That might be about to change. The share price performance over five years has been dreadful, falling from just over £10 in 2016 to £3.10 in August last year. Since then it has come up a bit along with the market to an unexciting £4.27.
However something has changed, as the company has at last found a streak of business at which it succeeds. This may well now catch the market’s interest. Yes, it is back to the over-used letters of ESG again (Environmental, Social and Governance). Ricardo has developed an expertise which has become vital for all companies and governments to at least claim to know something about – how to measure and minimise your low-carbon and clean-air profiles. Reduction in energy use as well as ‘decarbonisation’ – which means cleaning up systems to you and me – are both core areas of expertise. No matter how cynical you may be over the green future, this whole sector is going to be growing.
What Should I Do?
Sad to say that great engineering stories rarely get the credit they deserve. Make it a technology story or even better an environmental one, and suddenly it’s a different game.
Ricardo is in exactly that position and is very likely to carry on polishing its environmental credentials and services. This will not only make the company far more appealing to investors but also to potential industrial buyers trying to find a quicker way into the environmental market.
Obviously I am suggesting Ricardo as an attractive opportunity but as ever, a single company is a greater risk.
The theme, though, can be reflected in certain funds, some of which have been around long before this fashion fad became popular. Royal London Global Sustainable Equity fund and the Liontrust Sustainable fund both have successful track records.
Justin Urquhart Stewart co-founded fund manager 7IM and is chairman of investment platform Regionally.