3 shares with history on their side

Experian plc

Both Experian and Next are linked to Great Universal Stores (GUS). GUS was the creation of the Wolfson family and they, with Littlewoods, ended up dominating the post-war mail-order retail sector.

GUS slowly split itself up over many years. The businesses that emerged included Argos, Burberry and Experian. Argos tried to modernise the catalogue shopping proposition. Experian was different, though.

Catalogue retailing involved supplying goods on credit to agents. The agents then showed the catalogues to friends, neighbours and relatives who might place orders and pay in small weekly instalments.

Judging who might not be able to pay back their account balances was critical. So, GUS developed a credit bureau for gathering data of its own. It co-operated with banks, sharing the data on customers and creating a holistic view of credit worthiness, as well as profiles of where marketers and lenders should be focusing their efforts.

GUS merged their UK credit bureau with a US lookalike called Experian in 1996 and demerged the enlarged group onto the UK stock market in 2006.

The need to better understand credit risk led to GUS creating a business that today sits at the heart of the commercial data economy. It provides banks, marketers, and governments with the data they need to make effective decisions.

Experian is now valued at close to £30bn and has more than doubled its revenues since it first listed. That’s helped it become one of the top quartile FTSE 100 performers over that time, although past performance isn’t a guide to the future.

Next plc

The second company didn’t come out of a Wolfson-backed business, but instead a Wolfson came to it.

Some of us might remember men’s fashion tailors, Hepworths, which first opened its doors in 1864. A century later, George Davies arrived and set about transforming Hepworths into a more fashionable thing called Next.

It’s fair to say Davies got a little carried away, and soon Next stores of one sort or another were everywhere and Next had more debt than it could realistically handle.

But before he left, Davies executed a financial and strategic masterstroke. Acquiring catalogue retailer, Grattan, Davies launched the Next Directory.

In 1990, Next appointed Lord Wolfson as chairman. A few years later, a young Simon Wolfson arrived as a store trainee – quickly rising through the ranks and eventually becoming the youngest ever FTSE 100 chief executive at just 33.

There were people at the time who muttered about favouritism. Not for long, though.

Baron Wolfson of Apsley Guise as he is now, is the longest serving CEO in FTSE 100 history, still there more than 20 years later. Next’s share price, which at one point was only pennies when collapse seemed possible, is now over £80.

Why? Because George Davies’ masterstroke into catalogues gave Next the back end of a web business. And this let the Directory become an online business much faster than rivals.

Now, most of Next’s profits come from their digital division. For years Next’s overall stewardship has been outstanding, consistently allocating capital where it can best advantage its shareholders.

Without the vision of George Davies and the stewardship of generations of Wolfsons, Hepworths’ fate could have been very different.

Microsoft

Bill Gates stepped down from day-to-day control of Microsoft over twenty years ago. In his last year as CEO, Microsoft generated almost $23bn in revenue and $10.9bn in operating income.

Ten years later, the company reported revenues of $62bn and operating income of $24bn. Mr Gates might have been mature when he retired, Microsoft clearly wasn’t!

How has such growth been possible? Deal-making has played a part, with acquisitions from LinkedIn to OpenAI and most recently, the $68.7bn purchase of games maker Activision Blizzard.

Microsoft can afford to deal in these astonishingly large chips because of its history. Bill Gates’ inspiration led to the birth of Windows, an almost universal operating system for personal computers. So many machines now run on Windows that its revenues far exceed its continuing development costs.

To sell another copy, all that needs to happen is a download. No discs, boxes, nothing physical whatsoever. As a result, Windows is one of the most consistent cash-cow businesses that we might ever see.

Alongside this, Microsoft built Office, now the de facto monopoly provider of core software across almost every business in the western world and beyond.

This has created a durability and visibility of cash flows that gives Microsoft the luxury of being able to think far ahead and be ready for the future, long before it gets there.

Of course, they can get it wrong. But with analysts predicting free cash flow rising to between $90-100bn over the next year, they can do something about mistakes without necessarily breaking a sweat. The market expects a lot though so any mistakes will be sorely punished.