Paper and packaging firm Mondi, online betting company Paddy Power, U.S. tax preparer H&R Block, and Cisco Systems, the world’s biggest maker of computer-networking equipment, represent good investment opportunities with plenty of potential, Alex Gunz, fund manager at Heptagon Capital told CNBC.
With digitalization spreading across the globe fast, Mondi, Europe’s largest maker of office paper, has relocated a large part of its business to lower-cost emerging economies in recent years. Gunz said the company was using the “huge” amount of free cash flow it has generated very efficiently as a result, and therefore prefers it to other stocks in the sector.
“Mondi has a very healthy balance sheet,” Gunz said, adding that recent acquisitions the group made were helping the business grow.
Mondi, listed in London, in July agreed to buy Nordenia International, a packaging company operating Europe, the U.S., and Asia, to boost its consumer packaging business.
Gunz also sees value and growth potential in online betting company Paddy Power.
“If you understand how Amazon is changing the world of retail, Paddy Power is effectively doing the same thing with gambling,” he said.
According to Heptagon Capital, the global betting market is worth $280 billion, of which just 10 percent is online, and increasingly people use mobile devices and computers to gamble. Gunz said Paddy Power’s marketing policy is innovative. The firm is also the leading player when it comes to online gambling and has the potential to grow on the digital front, he said.
Computer networking giant Cisco also offers opportunities for investors, Gunz said. The firm currently focuses on data storage, a key growth area in the computer equipment industry.
With over 200 million emails are sent every minute of the day globally, data are growing at an “exponential rate,” according to Gunz.
Ciscoreported 90 percent year-over-year growth in data center revenue in August, up 42 percent from 2011 revenues.
Other reasons to look at Cisco is because of its “de-equitizing” strategy. “All the cash they are generating is used to buy back their stock or return it to shareholders via dividend,” Gunz said, and noted that this a “massive positive” for the business.
Although U.S. tax preparation company H&R Block posted a narrow quarterly loss earlier this month, Gunz is confident the firm is also worth keeping an eye on. “If we’re looking for things that respect certainty in a very uncertain world, paying your taxes is one of them,” Gunz said.
He is confident the new CEO and CFO, who joined the company in the past 12 to 18 months, will focus on the firm’s marketing and will expand the business on an international scale.
—By CNBC.com’s Liza Jansen
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Heptagon Capital owns shares in all four companies mentioned in this article.