Invest in what you know – how about Covent Garden?

Invest in what you know – how about Covent Garden?
27 September 2019

Image by Henryk Ditze / Shutterstock.com

I reckon that most of my readers have been to Covent Garden. The entertainment and shopping neighbourhood in central London attracts a staggering 44m visitors every year. Virtually anyone who has ever spent a weekend in London will have ended up in that part of town. Londoners visit it in large numbers, too.

Few people know, though, that you can easily buy a stake in Covent Garden.

There is a publicly-listed company on the London Stock Exchange that owns virtually the entire neighbourhood. Over the years, it has quietly accumulated 79 properties that now make up almost the entire area. Buying a stake in this company gives you indirect co-ownership of these properties, including the world-famous "Market Hall".

Crucially, this investment ticks a few boxes that I know "normal" investors tend to care about.

1: The product is easy to understand

You don’t need a degree in biotech or an up-to-date understanding of quantum computing to get a grasp of the company's business model.

Renting out property in one of the world's busiest and most famous neighbourhoods isn't a particularly difficult business to grasp.

Also, there are no complex risks involved. The tourism industry does fluctuate, of course. However, a visit to Covent Garden will remain as prominent a part of the European tourism industry as visiting the Vatican, the Louvre, or the old town of Barcelona.

There is no outsized load of debt, either. The company's financing is rock-solid.

2: It's bricks and mortar

The saying goes that we are all born with a brick in our stomach.

It's human nature to have a weak spot for real assets. I, too, enjoy owning physical assets.

Add to it the fact that property in AAA locations offers an extremely reliable income stream. Capital values of such assets tend to only ever go up in the long run, and in the meantime, you get to collect rent cheques (or dividends).

3: You can go and check it out in person

Much of the investment industry is accessible to insiders only.

An asset such as Covent Garden, however, is something you can check out yourself. If you are in London, it merely takes an underground or bus ticket.

If you have any doubt about the quality and attractiveness of Covent Garden, go and check it out.

Covent Garden

How about enjoying this as a stint of investment research?

Obviously, doing a spot check on the ground can only ever be a first step in analysing an investment.

For everything else, luckily, you have this website!

Will (blue-eyed) Sheiks buy Covent Garden?

I have drilled deep into the company that owns most of the Covent Garden estate.

Right now, you can buy its stock at a pretty advantageous price. At the current level (down 50% since 2015), it could make for an excellent long-term investment.

Though I am the first to concede that shareholders might not get to own it for very long. Within the next year or so, someone will highly likely swoop in and buy the entire company.

The Qataris already did so in the case of Canary Wharf, London's famous financial district. In 2014, Qatar's sovereign wealth fund launched a (hostile!) bid to purchase the company that owned large parts of the district.

An Israeli billionaire did the same with Camden Market. Another world-famous tourist area in London, it was delisted from the stock exchange in 2017, following an attractive offer that shareholders couldn't resist.

Next up – Covent Garden?

Some folks in New York might think so. An investment company specialised in publicly listed real estate firms has recently disclosed a stake in the Covent Garden company. They were also invested in the Canary Wharf company at the time and doubled their investors' money in the space of two years.

Covent Garden could easily end up with a sovereign wealth fund from a country like Qatar or Norway. Come to think of it, the Norwegians recently stated that their 1 TRILLION dollar wealth fund was looking to increase its exposure to the UK. Incidentally, they already co-own Regent Street.

One way or another, Covent Garden is likely to end up in the crosshairs of private equity companies, sovereign wealth funds, and billionaires. It's simply too tasty an asset.

How to best benefit from this constellation?

Google will only get you thus far

With a bit of Googling, you can easily find out the name of the company in question and its vital stats.

However, if you are after the kind of details and conclusions that aren't easily available in the public domain, I recommend you read my latest research report, published this week.

Across 24 pages, I'm looking at a scenario that involves a potential bid, as well as the prospects of a long-term investment. I have done my usual sleuthing, which is why the report includes insights that you would probably struggle to come up with yourself. There are a few other aspects to this company that are a bit more complex but add an exciting second angle to it.

I finished this report in New York. The meetings I had over here only confirmed my gut feeling that something will be afoot at this company in the foreseeable future. It is significantly undervalued, and there are several potential catalysts that should lead to a higher stock price.

If you think Googling this story will give you a complete picture: good luck! Better get on the case and start reading that report…

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