MIDAS SHARE TIPS: Strike it rich with Oakley Capital, an investor that unearths online winners with long-term growth prospects

By JOANNE HART, FINANCIAL MAIL ON SUNDAY

Updated: 07:18 EDT, 18 May 2022

e-mail

Peter Dubens was just 18 years old when he founded his first business, selling T-shirts that changed colour as their wearers grew hotter or colder. That was in 1986.

Within five years, Dubens had sold the business for £8million. The young entrepreneur went on to found and run a string of successful ventures, steadily adding to his fortune along the way.

By the early 2000s, Dubens had made hundreds of millions of pounds, not just for himself, but for his backers and investors. That was when he set up Oakley Capital, a private equity firm with a difference – established by an entrepreneur to help like-minded business owners expand and develop their companies.

Taking aim: Oakley Capital Investments snapped up Vice Golf, which sells golf balls online, earlier this month

Since that time, Oakley has raised £3.5billion and used that money to support 43 firms, from Parship, Germany's leading online matchmaking service, to WebPros, a Swiss/American business which manages 85million websites across the world.

Normally, individual investors are excluded from the private equity world. But Oakley Capital has a stock market-listed arm, Oakley Capital Investments, in which anyone can invest.

The shares are £4.15 and should increase materially over time, as the group today owns 22 businesses, which are growing by an average of 30 per cent per annum and should prove resilient, even if the economic climate worsens.

Oakley focuses on companies that follow one overriding trend – the growth of everything online and digital. Some of the firms in its portfolio help businesses to be technologically adept, through subscription-based software products and website support.

Others allow consumers to buy goods and services online, from insurance to water pitchers. And some provide access to high-quality education.

One of Oakley's fastest-growing investments, for example, is IU Group, a German university which offers online and on campus degrees. Oakley bought IU in 2017, when there were around 15,000 students.

Today, there are more than 80,000, most of whom are in their 20s and 30s, studying online to gain fresh qualifications. Courses are offered in German and English, many students are based outside Germany and numbers should increase as IU becomes increasingly international.

On the consumer front, Oakley seeks out businesses that offer something slightly different from their peers. In the UK, for instance, around 80 per cent of motorists buy car insurance online.

In Italy, just 15 per cent of drivers go down that road, even after the Covid pandemic. Preferences are changing fast however and Oakley-backed Facile, Italy's biggest price comparison website, is on the crest of the wave.

Dubens and his team are on the look-out for quirky firms too, such as Vice Golf, a Munich-based company acquired at the beginning of this month. Founded by two young professionals in 2012, Vice sells premium golf balls online far more cheaply than its competitors and sales have been increasing by more than 40 per cent per annum in recent years.

Many of Oakley's businesses are in Europe but there are UK investments too, including Globe-Trotter, a British luxury luggage firm, whose suitcases are prized the world over and ICP Education, which runs more than 40 nurseries across England.

Frequently, the businesses that Oakley backs are owned by the original founders, who may be reluctant to sell to impersonal investment firms or larger rivals. With Oakley, however, they feel comforted by the group's entrepreneurial leanings and its reputation for treating business owners with respect.

This allows Oakley to reach firms that other investors cannot, such as Alessi, the designer Italian firm that was in family hands for generations before selling to Oakley in 2019. Since that time, the group has moved from losses to profit, moved away from old-fashioned items such as tea trays and dramatically increased online sales.

Last month, Oakley reported that its portfolio was valued at just over £1billion or £5.71 per share.

Oakley management are a conservative bunch so they tend to value their businesses in line with the price that they paid for them, even though the firms have generally grown substantially since that time. As a result, when businesses are sold, the average price is 50 per cent above the price at which they are held in Oakley's books.

This should mean that Oakley's portfolio holds its own, even if financial markets become more turbulent. The company pays a small dividend too, with 2.25p paid out for 2021 and a similar figure expected for this year.

Midas verdict: Oakley Capital looks for dynamic companies in sectors with long-term growth prospects, irrespective of economic cycles. At £4.15, the shares are undervalued. An attractive buy in uncertain times.

Traded on: Main market Ticker: OCI Contact: oakleycapitalinvestments.com or 020 7766 6900