3i Group Weathering Credit Crunch

In this lousy market, we'll take good news wherever we can find it. Apparently one place with good news is portfolio holding 3i Group PLC (which trades in London under symbol III).

If you're a long-time reader of this blog, you'll recall that one of the things I like about 3i is its focus on medium-sized deals. Most private equity outfits target mega deals. This strategy is paying off for 3i:

According to Charles Stanley analyst Stephen Peters, the company has also been operating in the mid-cap investment market, where lending by banks has not been hit as severely as for multi-billion dollar takeovers. "As 3i has said in the past, it has always had a good relationship with mid-market banks across Europe. Instead of going to two or three banks, it may have to syndicate out to five or six, but it can still get the deals," he told Forbes.com.

Further down the story:

Patrick Dunne, 3i's director of communications, told Forbes.com that the company had become "very picky" about its investments and realizations since the credit crunch began last August. "Although the rate of realization is lower, the profit per pound is the same as last year," he told Forbes.com.

He says the company is also optimistic about good opportunities amid the market turmoil. "Clearly the infrastructure sector is very interesting for us, and we think there will be great opportunities in the mid-market buyout market, and a fledgling buyout market in Asia." He added that the company expects to see strong growth within its capital business, which provides equity to companies, such as those expanding internationally.

3i Group's share price is down since I bought it in 2005. But it's been a winner counting dividends and special payouts (the company had some large payouts in 2006 and 2007). It's currently trading at a discount to net asset value, making it particularly attractive in my view.

I try to resist falling in love with managements -- but I admire CEO Phil Yea and his team immensely. Of course, now that I say that it could blow up. Or we could see a financial disaster so severe it takes down even the best managed firms. I don't think that will happen for a second. But that's why we diversify our money over several holdings, and not bet the bank on one stock like an Enron dolt.