Private Assets Are Coming to Your Portfolio…Be Ready

Tyler Crowe (0:02)

The SEC says private assets are all right. Motley Fool Hidden Gems Investing starts now.

Welcome to Motley Fool Hidden Gems Investing. I'm your host, Tyler Crowe, and today I'm joined by longtime Fool contributors, Jon Quast and Lou Whiteman. Guys, we're gonna get into what has been a large theme so far in 2026, and that is bringing private assets, private capital, private equity to the masses, to the retail investors, to the people like us.

We're also gonna jump into the mailbag, but we have to start today with the earnings surprise numbers of the day, and that's Accenture. Shares are up about 19 percent as we're taping on better than expected earnings. Revenue and earnings both beat expectations, and their fiscal guidance, because this was the end of their fiscal 2026 year, they said fiscal 2027 came in also slightly higher than Wall Street expectations. So, this has been a company that's been on a slow glide path down recently. And so, the question to me is, what went right for a company that has been rather short on good news over the past couple of years?

Jon Quast (1:10)

I'm sorry to be that guy, Tyler, but what went right was Accenture didn't die.

It kind of reminds me of the scene from the Monty Python movie years ago, where they're saying, bring out your dad, and they throw the guy on the wheelbarrow and he says, I'm not dead yet. This is kind of what that is. Accenture is not dead yet, but I wouldn't say that business is necessarily booming. You look at its fiscal 2026, which is what it just completed.

Revenue in local currency, which I think that's a good metric since it is an international business measuring that in the local currency, revenue only up 5 percent year over year. That's not exactly thriving. It's okay, but it's not anything that you're going to write home about. You look ahead to fiscal 2027, management only expects 3 percent to 6 percent growth. So it could even decelerate further into the coming year. So this isn't necessarily a great victory for Accenture, but it is still alive.

Lou Whiteman (2:10)

Right. And you know what? Maybe that's enough because valuation matters here, and going into earnings, the stock had dipped below 10 times expected earnings. Just two years ago, they were up in the 30s.

So this was, I mean, yeah, Jon, I don't think you're being that guy. I think sometimes just announcing that, hey, the sky actually isn't falling. That is enough, at least in the near term. I think Jon summed it up well. They beat expectations. Expectations were dismal. If you look at what expectation, like the way they've guided down.

But look, three months ago, there was a debate about whether or not Accenture can survive. So these results help answer those questions. I don't know if it's a massive growth stock from here, but if it isn't going to zero, if there are signs that it's not going, then there is a reason to bounce off of a single digit multiple, I think, and that's what we're seeing. Look, guys, if they're not going away, it's still only 14 times earnings today, which is still cheap. But yeah, that's, I think, the harder question from here.

Jon Quast (3:15)

Well, I think there are a couple of other things that signal that maybe it is a little bit stronger than what investors were giving it credit for. You look at the operating margin, look at the non-gap, because that does exclude some one-offs that were more favorable compared to last year. The operating margin did go up slightly year over year. So 15.8% operating margin, that's a very respectable margin and slightly better than last year. So that is good. You also look at the cash that it's returning to shareholders.

Basically, returning all of the cash, free cash flow to shareholders over the past year, in the form of share repurchases and dividends. I suppose you could be glass half empty kind of a guy and say, management is out of ideas and trying to solidify its shareholder base, but glass half full, it really does see its stock as an attractive value and it's putting its money where its mouth is, by deploying that free cash flow into share repurchases.

Lou Whiteman (4:12)

Accenture has always been a cash return story. It has been for a long time. I'd be more nervous about that if this was a new change that might say, they've run out of ideas, but yeah, this is what they do.

Tyler Crowe (4:23)

Yeah, I was going to say when you're a consulting company and all your assets are people and your capital expenditures are on chairs and office equipment, it's not like you have to spend much to keep the lights on with a business like this. Now, this is the section we want to eat Crowe. We're going to go behind the curtain a little bit with some of our Motley Fool services both on the Hidden Gems and the Rule Breakers teams. Past couple of months, we've either sold Accenture in real money portfolios or even put it on hold in some of our recommendation services.