Shopping carts (with wheels and without)
The consumer staples sector captures companies selling everything from toothpaste to chewing gum, from chocolate bars to fish-fingers. Garry Laurence, portfolio manager of the Perpetual Global Share Fund, has been on the road looking for the best performers in the sector – and especially for ones that are under-priced.
“I went to a consumer staples conference in the US… there’s a pickup in excitement around revenue growth for consumer staples companies as they look to re-invest the savings from the Trump tax cuts back into new products and innovation.” Garry Laurence says. Watch video interview to learn more.
One such company is US-based Mondelez. It’s the world’s second largest confectionary maker and it owns brands like Cadbury, Oreo, Toblerone and Milka. We all recognise these brands, but what might be surprising is how broadly they’re sold — they’re well-loved across the US, but also in Europe and India. In fact some 76 per cent of their revenue comes from outside the US, with 35 per cent coming from emerging markets.
In India, Cadbury is the number one chocolate brand. It may have only a one per cent market share in the US, but it’s much larger in other markets. It’s a great company with considerable brand power. Its growth potential remains strong on the back of new products like the Milka-Oreo chocolate bar.
More than chocolate bars
Nomad Foods is another high quality company and owns some well-loved consumer staples brands. In Europe they own the Birdseye brand, as well as Findus and Iglo which sell frozen vegetables, fish fingers and frozen chicken.
The company is currently in a consolidation phase after a flurry of acquisition activity. Gains have been made in streamlining the overall product offering to focus on the most valuable labels.
Consumer staples seen as recession proof
While many sectors find themselves rising in good times but suffering in a downturn, the consumer staples sector tends to be counter-cyclical. Chocolate bars and frozen dinners are things we buy no matter the over-riding economic conditions. In some circumstances we may even end up buying more as belts are tightened and we forgo more fancy options and instead opt for the cheap-and-easy.
E-COMMERCE
The whirlwind of ecommerce has caused widespread digital-disruption, but when you dig into the numbers, it appears this strong growth may just be getting started.
The sector is maturing, however globally 90 per cent of sales are still coming from bricks & mortar stores. Most interesting is that in China the shift is stronger, with 20 per cent of sales being online.
The next 5 – 10 years are poised to see continued strength in this online retail trend.
The Perpetual Global Share Fund owns stakes in big names like Alphabet (owner of Google) and EBay; and in China the fund is enjoying the success of the giant online retailer VIPshop.
Gaining exposure to the upside of this trend can also be achieved indirectly. Companies like FedEx are seeing strong gains as they adapt their logistics services to facilitate the delivery of all these goods.
In the US, FedEx sits next to UPS as the one of the two key players in the market.
For further insights visit www.perpetual.com.au
This information has been prepared by Perpetual Investment Management Limited (PIML) ABN 18 000 866 535, AFSL 234426 and issued by Perpetual Trustee Company Limited (PTCo) ABN 42 000 001 007, AFSL 236643. It is general information only and is not intended to provide you with financial advice or take into account your objectives, financial situation or needs. To the extent permitted by law, no liability is accepted for any loss or damage as a result of any reliance on this information.
The information is believed to be accurate at the time of compilation and is provided in good faith. This document may contain information contributed by third parties. PIML does not warrant the accuracy or completeness of any information contributed by a third party. Any views expressed in this document are opinions of the author at the time of writing and do not constitute a recommendation to act.
The product disclosure statement (PDS) for the Perpetual Wholesale Funds, issued by PIML, should be considered before deciding whether to acquire or hold units in Perpetual Global Share Fund – Class A. The PDS can be obtained by calling 1800 022 033 or visiting our website www.perpetual.com.au. No company in the Perpetual Group (Perpetual Limited ABN 86 000 431 827 and its subsidiaries) guarantees the performance of any fund or the return of an investor’s capital. Total returns shown for the Perpetual Global Share Fund have been calculated using exit prices after taking into account all of PIML’s ongoing fees and assuming reinvestment of distributions. No allowance has been made for taxation. Past performance is not indicative of future performance.
AUTHOR
Partner Article
Recommended for you
Hybrid securities can offer investors equity-like returns, yet with a lower level of risk. Here’s a rundown on hybrids and why they are attractive investment options.
Diversified managed funds could make an ideal addition to a managed account, as the broad toolset available to the fund manager enables them to seek outperformance and manage risk, according to Allan Gray.
The number of advisers using managed accounts has exploded in recent years, often at the expense of diversified managed funds. But diversified funds deserve a place in almost any multi-asset portfolio, held either within or alongside a managed account, according to Allan Gray.
Over the years government regulations regarding financial advice delivery has increased complexity, compliance costs and time to deliver advice. As a result, financial advisers have been forced to “orphan” their less affluent clients.
