Two top stock ideas from ISA millionaire John Lee

John Lee may not be as well known as star fund managers such as Neil Woodford, but the private investor has over the years built up a devoted, and incredibly well-earned, following among investors looking to build truly long-term wealth. They come to Lord Lee because his record of investing in relatively under-the-radar small-caps made him one of those to have £1m in an ISA. So, which companies have helped him achieve this? A family-owned dynamo  One classic share that fits many of his parameters is soft drinks maker Nichols (LSE: NCLS). The business is well over a century old but is still chaired by the founder's grandson, whose presence and nearly £30m worth of personal holdings in the business provides a steady hand and long-term outlook that should comfort retail investors. Then there is the group's comfortable profitability that feeds a very hearty dividend. For the year to 31 December, the group's operations produced 67.76p per share in pre-exceptional earnings that funded 33.5p in annual dividends, which at the current share price represents a 2.2% yield. After rising 14% last year, there's good scope for considerable dividend hikes to be repeated as the group continues to grow both its core soft drinks business, which is based around cult favourite Vimto, and its distribution business that serves pubs and restaurants. In 2017, all main parts of the business grew well with UK Vimto sales up 9%, international sales up a whopping 20.4% and the domestic distribution business generating 11% organic growth and 21.5% top-line growth thanks to an acquisition. All told, revenues for the year were up 13.2% to £132.8m for 2017. And although operating profits fell 5.3% to £28.7m, I'm not overly worried as this was due to the war in Yemen leading to the group's shipments there being blockaded and industry-wide cost input pressures that I'm confident management can recover over time. Nichols isn't cheap at 23 times trailing earnings, but I'm confident this business can still deliver staggering rewards going forward, just as it has since Lee began a position in it back in 2002. Founder-led growth in spades Another Lee favourite I've got my eye on is event organiser Tarsus (LSE: TRS). The company's business is a straightforward but hugely cash-generative one as it puts on events in rented exhibition centres and collects pre-paid ticket revenue from businesses up to a year in advance. A portfolio of market-leading events in niche sectors such as adhesive labels has helped the group boost organic growth by at least 7% annually over the past three years. And acquisitions have also done their bit to boost revenue from £86.9m in 2015 to £117.7m in 2017. EBITDA rising to £44.9m last year helped boost dividends per share by 10% for the year, to 10p, which works out to a 3.33% yield at today's share price. While there are a few worries with Tarsus, namely its £84.8m in net debt racked up from acquisitions and its cyclical nature, I reckon the group's founder-led management team, attractive industry dynamics that favour ever-larger organisers, and its bevy of name-brand events make it a great long-term pick trading at just 12.8 times trailing earnings.

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Ian Pierce has no position in any of the shares mentioned. The Motley Fool UK has recommended Nichols and Tarsus Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.

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