Please find below our Investment Market Update as at 22nd May 2020.
Blue Sky Investment Market Update
Don’t underestimate the power of change
We live in a rapidly changing world and in the last 4 years, here in the UK, it feels like we’ve experienced nothing but turmoil. The outlook has been uncertain.
However, we shouldn’t underestimate how adaptable and innovative we have been. During this period there has been some exciting developments, particularly around technology and the environment which have enhanced our lives, solved issues and driven efficiencies.
The crisis we now find ourselves in has been intense, but it has also heightened our adaptability and shone a light on our ability to change.
Think of the ways in which supply chains have been adapting, or how products have been modified, or how administration and compliance have flexed to deliver more efficient service propositions. As LGT Vestra stated this week; “the crisis has demonstrated the powerful impact that collaboration and co-operation can have”.
As we transition out of this situation, probably every company in the land will alter the way they do business to some degree. Projects which were most likely on the back burner have been brought to the fore, fast tracking development and services of which we will all ultimately benefit from.
- Consumer goods companies re-purposing bottles from poor performing brands, into newly developed hand sanitiser products
- Companies such as Ocado and Amazon have adapted their product range to continue to deliver goods to our doorsteps, in quite amazing timeframes considering the challenges
- Collaboration from companies like AstraZeneca and Oxford University working together to develop vaccines
- Brands such as Nespresso increasing the sales of their products by mid-single digits, despite the closure of their retail locations
Much closer to home, well on the Fylde coast actually, I can relate to Nespresso. I was speaking to my cousin who owns the Fireplace Superstore and he can’t believe how busy he is. Early in lockdown he was concerned that business would be very slow. Typically, it is the quietest time of the year, yet he has been unexpectedly busy. So much so, that he might just well have the best quarter he’s ever had at this time of the year!
What’s going on then? Why are people buying fires when it’s been so hot?
He said that most people are saving money and are not spending like they would normally. To boot, many have time on their hands. They have been rooted in their homes and have decided that change is required. Now they have more time to undertake research and find what they want. They probably won’t be going on holiday and have decided to use this extra disposal income to invest in their homes instead.
So, not only is he busy, but he’s selling bigger ticket items too – who’d have thought?
To be fair to him, he has spent a lot of money on technology, website presence etc and he’s now reaping the rewards.
I’ve heard a lot of similar stories in our locality too which is really encouraging. It’s so easy for our heads to be turned by what’s reported regarding the hospitality sector, airlines, travel companies etc but it’s important to realise that when there is disruption, besides those that suffer, there are plenty of winners!
I’m sure you all have examples of good and bad service during this lockdown; I still haven’t received my golf net for the garden, which I ordered 10 weeks ago. Sadly, I now don’t need it as I’m back out on the course. There are those of course who would argue that I need all the practice I can get!
Examples from within the Blue Sky LGT Vestra model portfolios
There are lots of innovative companies that are nimble and adaptive to threats and opportunities. It’s no surprise that on many of the days the S&P 500 in the US falls, market leaders like Amazon seem to rise.
LGT Vestra have highlighted three companies held by some key funds in the model portfolios that have demonstrated an ability to adapt their businesses:
JD.com, the Chinese online giant, has been using drone technology to provide critical goods. They have utilised a fleet of drones to deliver packages to parts of China which were previously only accessible by boats. These drones have also conducted ground surveys and final flight tests. Elsewhere in inner Mongolia, they have used drones to disinfect areas by spraying disinfectant in the High-Tech Industrial Zone of Ordos City.
JD.com is held within the RWC Emerging Markets fund.
Diageo has helped alleviate the hand sanitiser gel shortage by redirecting their vodka and gin distilleries to manufacture ethyl alcohol which is used in hand sanitisers. Other brands such as Pernod Ricard and LVMH have also contributed to the cause.
Diageo is held in the Fundsmith equity, Liontrust Special Situations, the Trojan funds and Fidelity Global Dividend.
Morrisons Supermarkets have partnered with Amazon Prime for deliveries and to deliver packaged boxes of fruit and vegetables. They have adapted their business model, integrating a click and collect model at 280 stores by mid-June and increasing the number of delivery slots by three times the amount. They have now doubled their online sales since last year. Bodes well for the future.
Morrisons is held in Schroder income, Threadneedle UYK equity income and the L&G UK 100 index funds.
As Charles Darwin once said; “It is not the strongest of the species that survives, nor the most intelligent; it is the one most adaptable to change.”
Sign up for our Webinar with Phoebe Stone from LGT Vestra
Investing in sustainability funds is attracting a lot of attention and it’s an area we have been advocating for some two years now. There is significant evidence that those companies who don’t embrace strong environmental and social governance could get left behind when it comes to where money may be invested.
Join us and listen to Phoebe on Wednesday 3rd of June at 10.30 am. You’ll just love her passion for all things Sustainable. It’s worth setting aside 30 mins of your time.
Below is a short intro Phoebe has prepared for us:
To reserve your place, email firstname.lastname@example.org.
Have a great weekend.
Gary and the Investment Team
Please Note: This communication should not be read as giving specific advice regarding your personal circumstances. This would only be given following detailed assessment of your individual needs. The value of investments may fall as well as rise; you may get back less than invested. Past performance is not necessarily a guide to future returns.