Investment Insights: Accenture

With investing, it is impossible to reliably predict short term market movements, but if we are not greedy we can invest in companies where we can be confident that long-term performance will be very good. Accenture is one such company that many of our clients have a holding in. This is a recent update we sent to clients.

I hope this email finds you well. I wanted to share with you some insights regarding Accenture, a holding in your portfolio, and why I believe it continues to be a sound investment.

Accenture: A Slow Burner with High Return on Capital

Accenture stands out as a company with a consistent track record of delivering value. Its business model is not about quick wins but rather about sustainable growth. The company has demonstrated a high return on capital of 24% which is a probably the most important measure for an investor as it represents what you as an owner are receiving. If a company can sustain a high return on capital, the share price will follow in the long run with very similar returns.

This characteristic has made Accenture a "slow burner" in the investment world but reliable. It has provided long-term performance without the volatility often seen in more hyped-up companies.

Positioning in the AI Gold Rush

In the current landscape where AI is transforming industries, Accenture is well-positioned to benefit significantly. The analogy here is that you want to be the person selling picks and shovels during a gold rush; while many companies are racing to implement AI, Accenture is providing the expertise and consultancy services necessary for companies to transition. Recent reports indicate that Accenture's generative AI bookings have seen substantial growth, suggesting an increasing demand for their services in this domain. This positions Accenture not just as a participant but as a facilitator in the AI revolution, potentially leading to robust revenue streams from consultancy and implementation services.

Recent Performance and Market Perception

Over the recent weeks, Accenture's share price has performed well, reflecting increased investor awareness in their ability to benefit from AI consultancy. What's particularly appealing about Accenture is its under-the-radar status. Unlike many tech companies that are frequently discussed on platforms like CNBC or Bloomberg, Accenture does not suffer from an overhyped share price. This lack of media spotlight might mean that its stock is not as inflated by short-term market sentiment, offering a more grounded investment opportunity.

Portfolio Diversification

While we are optimistic about Accenture, it's important to maintain perspective. Individual holdings like Accenture should remain a relatively small percentage of your portfolio, as anything can happen with any company. However, if we could find 20 companies with Accenture's characteristics we would have a very strong portfolio.