Pieter Slegers — Best Buys: May 2026

KKR is the month's number one pick. It invests institutional money — pension funds, insurers — in companies, infrastructure and private lending, and now looks after nearly $750 billion.

The argument is that in this industry, being big is itself the advantage. When money is expensive and investors are cautious, smaller firms cannot raise new funds at all; KKR raised a record $129 billion last year. It also has about $126 billion of uncommitted cash sitting ready, which is worth a great deal precisely when asset prices are falling.

The share price is down about half from its high on worries about private credit. The signal offered against that is insider behaviour: executives have been buying heavily. As the write-up puts it, there are many reasons an insider might sell — a house, a divorce, a tax bill — but only one reason to buy.

3i Group is really one investment: Action, the European discount chain, which sold €16 billion of goods in 2025. The shares have nonetheless fallen nearly 50% from their high.

Two things spooked investors. Sales growth in France, Action's second-biggest market, slowed to 2%, which raised the fear that Europe is filling up. And 3i committed €400 million to launching Action in the American Southeast in late 2027 — and European retailers have a poor record in America; Tesco's attempt failed expensively.

The counter-argument is about the business model. Action buys in enormous volume, passes the savings to customers as lower prices, attracts more shoppers, and buys in even greater volume — a cycle known as scale economies shared, and the same one that built Amazon and Costco. It does not stop working because one country's growth slows for a year.

The neat way of framing the opportunity: the shares trade below the stated value of what 3i owns, so you are buying the European business at a discount and getting the American venture thrown in for nothing. If it works, that is a large bonus; if it fails, you have not paid for it.

MSCI creates the stock market indexes that funds are measured against, and charges a small fee on every dollar tracking one — more than $18 trillion in total. It also sells data and analytics software to the same customers, which is the higher-margin half.

Investors have marked the shares down on the fear that artificial intelligence will let any firm build its own indexes. The answer given is precise: building an index is trivial, and always was. What is not trivial is getting every pension fund and bank in the world to trust yours, and to have wired it into their systems for thirty years. That is the actual product.

The business is not slowing: revenue in the first quarter of 2026 was $850.8 million against $745.8 million a year earlier. And MSCI spends its considerable spare cash buying back its own shares, so an investor who does nothing owns a slightly larger slice of the company each year.

Hermès makes Birkin and Kelly handbags, silk, watches and perfume, and deliberately makes fewer of the famous items than people want. Leather goods are about 43% of sales, clothing and accessories 28%, and everything else 29%. In 2025 it sold €16 billion, growing 9%, and kept 41 cents of every euro as operating profit — an extraordinary margin for a manufacturer.

The technical term used here is worth learning: Hermès is a Veblen good. For most products, raising the price reduces demand. For a Veblen good the opposite happens — the higher the price, the more desirable the item becomes, because the price is part of what is being bought. That is why the waitlist exists and why it works.

Two other supports. It owns its whole supply chain, from the tanneries to the workshops, so quality is controlled in a way rivals cannot match. And its customers are the very rich, whose spending holds up in a downturn — which is why Hermès is usually the last luxury house to feel a recession and the first to come out of it.

FICO owns the credit score American lenders rely on, licensing it to the three big credit bureaus — Equifax, Experian and TransUnion — and collecting a fee every time a score is pulled. It has been about as close to a legal monopoly as a private business gets.

In April the American housing regulator said it would allow a rival score, VantageScore 4.0, to be used for mortgages. The shares are now more than 55% below their peak, because the thing that made FICO safe — the rules — was the thing that changed.

Three reasons are given for thinking this is an overreaction. First, lenders who add the new score will keep pulling FICO too: in lending, having more information beats swapping one source for another. Second, decades of regulation and banks' own risk models are built around FICO, so genuinely replacing it would mean years of rebuilding systems for no obvious gain. Third, the political complaint was about price, and a score fee is trivial next to a $500,000 mortgage — what lenders actually care about is which score predicts defaults better, and FICO's newest version is still the standard.

The shares are now near their cheapest valuation in a decade, and results reported the same week were strong. The conclusion drawn: "the investment thesis is not broken after all."

QXO distributes building products — insulation, roofing, waterproofing, lumber — sitting between the manufacturers and the contractors who install them. It is barely a few years old as a serious business and is already number one or two in almost everything it sells, because it has bought its way there: more than $30 billion of acquisitions in twelve months, in an $800 billion industry.

The reason to pay attention is the man running it. Brad Jacobs has done this four times before in four different industries, and the formula is always the same. Find a large, fragmented industry full of small local firms still running on paper and phone calls. Raise a great deal of money and buy the biggest players first, so you instantly have scale and buying power nobody local can match. Then bring in technology to strip out the inefficiency — AI route planning at his trucking company XPO, centralised pricing and stock control across QXO's 1,150-plus locations.

His record: he sold United Waste Systems for $2.5 billion, built United Rentals into the world's largest equipment rental firm from nothing, and grew XPO's revenue from $175 million to $15 billion.

TopBuild is North America's largest distributor and installer of insulation, and QXO agreed in April 2026 to buy it for $17 billion. The shares are up 444% since 2020.

The deal adds $6.2 billion of annual revenue and more than 400 locations, and management expects $300 million a year of cost savings by 2030 from combined purchasing and logistics.

The most important part is less obvious. QXO's business earns about 8 cents of operating profit per dollar of sales. TopBuild earns about 18 cents. Bolting the two together lifts the combined figure to roughly 12 cents — so QXO has improved its own profitability by buying someone else's, which is much faster than trying to squeeze more out of its existing operations. It also makes QXO the number two building-products distributor in North America overall.

Action is the European discount chain that makes up almost all of 3i Group's value. It sold €16 billion of goods in 2025 and keeps opening stores at a remarkable rate.

Two worries knocked the shares. Growth in France, its second-largest market, slowed to 2%, which made people wonder whether Europe is running out of room. And Action is spending €400 million to open in the southeastern United States from late 2027 — a move European retailers have historically got badly wrong.

The defence rests on how the business actually works. Because it buys in vast quantities, it can sell cheaply; cheap prices bring more customers; more customers mean even larger orders and lower costs, which fund lower prices again. Economists call this scale economies shared, and it is the same engine behind Amazon and Costco. One slow year in one country does not break it.