Recession-proof your investments with our equity fund and portfolios, positioned to offer a more defensive approach that may help minimise loss during a potential recession, as market volatility continues due to the coronavirus.
At Ashburton Investments, we are focused on finding opportunities with a sensible balance of risk and reward.
Below Dr James Cooke, Head of Global Equity Research highlights some of the strong stock holdings and reserves found in our equity range, found in the Ashburton Global Leaders Equity Fund, the Ashburton Global Equity Growth and the Ashburton Global Equity Income portfolios.
Global Leaders Equity
In a volatile and uncertain world where investment returns are unpredictable, our Global Leaders Equity strategy provides access to as many as 25 of the world’s leading mega capitalisation companies including health, technology and finance, that are well positioned to weather the deep, but hopefully relatively short, global recession induced by efforts to slow the spread of the Coronavirus. In searching for quality companies, the team seeks out those with defensive balance sheets and which provide returns on capital in excess of the cost of that capital. As these firms compound their intrinsic worth over time the entry multiple is relatively less important than having a long term time horizon. Global Leaders Equity is available both as a fund and as a portfolio.
Microsoft is a leader in enterprise and infrastructure software globally, offering operating system software, application software and server applications/enterprise software. The delivery of the offering includes on premise and cloud-based solutions including “Azure”, the company’s integrated public cloud platform. Microsoft also offers adjacent products in gaming, search/display (Bing), communications (Skype) and hardware. The current coronavirus disruption may have some temporary impact on demand of new PCs. The increase in the numbers of people working from home may further accelerate cloud adoption. This is also a stock holding in our Global Equity Income Portfolio and in our Global Equity Growth Portfolio.
J&J, the 135 year old healthcare giant, has grown to become the largest most diversified healthcare giant globally with operations in virtually all countries in the world. Their operations span three divisions: pharmaceuticals (which provides 51% of its revenue and 58% of its profit), medical devices (which provides 32% revenue and 32% of its profit) and consumer healthcare (17% revenue 10% profit). It also has a AAA rated balance sheet which provides scope for strategic deals. Johnson & Johnson is ideally placed to benefit from medical demands of an ageing demographic, as people tend to live longer. J&J’s recent announcement that they are working with the US government to produce a Coronavirus vaccine is likely to be more positive to sentiment than earnings given a stated aim not to make money from the venture.
Reckitt Benckiser is emerging from a series of mis-steps with a new CEO. The end markets are attractive but the firm has been losing market share. We believe that the CEO’s plan to reinvigorate the brands (which include Dettol, Durex, Finish and Nurofen), will see a return to growth. Third party survey data indicates a significant increase in sales recently, perhaps due to households stocking up on cleaning products.
Tencent was founded in 1998 in China and operates as an investment holding company. Most simply Tencent is China’s Facebook, Paypal, Spotify / YouTube but with own content, plus online games. With Facebook banned from China, Tencent reigns supreme with its own social media services like QQ and Weixin, while Facebook leads in the rest of the world. The firm has grown to become an investment holding company providing internet and mobile value-added services, games, online advertising and e-commerce. New ventures are being developed and acquired as the firm evolves from social media giant consumer internet business to an “industrial internet player” including relationships with financial services companies. The firm has a market share of over 62% in Chinese online PC games and 47% share in smartphone games. The social media platforms dominant China, QQ and Weixin have close to 1.1bn users combined. Tencent does not profit maximise its client base preferring to maintain loyalty in the long term. This combined with the close control of the Chinese government on social media means that Tencent’s dominant position is likely to remain unchallenged for some time. Reports indicate an increase in engagement with Tencent products during the coronavirus lock down period. This is also a stock holding in our Global Equity Growth Portfolio.
1. Amazon – (Global Equity Growth Fund holding)
Amazon is one of the largest e-commerce and cloud computing companies in the world. Amazon is a market disruptor, employing predatory pricing strategy to gain share in new markets. Amazon Web Services (AWS), is one of the main profit drivers and highest margin business segment within Amazon. The e-commerce business is marginally profitable, with wafer thin margins at best. Amazon has shown in recent quarters that it can increase margins to meaningfully impact the bottom line. Self-isolation efforts due to the coronavirus are likely to push people to try using on-line services for the first time likely resulting in an acceleration of the trend to adopt on-line shopping.
2. Royal Dutch Shell – (Global Leaders Equity and Global Equity Income Fund holding)
Shell has the balance sheet to withstand lower oil prices for a protracted period. Meanwhile, the company is one of the world’s largest LNG producers. Oil demand has been cut significantly due to reduced economic activity and a reduction in travel. Storage capacity is running out. Meanwhile the Saudi’s and Russian have failed to agree to production cuts. This has resulted in a huge reduction to the oil price. There are several reasons to expect this to reverse, including a recovery in demand, higher cost production permanently leaving the market, and major oil producers coming to agreements on production cuts, given that lower prices are bad for budgets of oil producing countries.
Our investment philosophy
Whether invested in a fund or a portfolio, our clients have direct access to our expertise through a diversified, global range of investments across various asset classes.
- We prudently manage client portfolios based on fundamental downside protection within a risk-controlled framework. Risk management is embedded in our investment process. Our portfolio construction emphasises the safeguarding of investor capital through the application of various risk measures, with a key focus on limiting drawdown risk
- We’re a trusted investment manager with the backing of a large parent company – FirstRand Group, one of Africa’s largest financial services companies by market capitalisation, we have access to the vast expertise and resources within the broader group
- Our investment research is performed in Jersey, along with the management of our investments.
Talk to us
Find out more about our Global Leaders Equity Strategy here
More information on our equity fund and portfolio range call 01534 512000 or email PortfolioManagement@ashburton.com
Existing clients, please contact your usual Ashburton Investments representative or email ClientSupport@ashburton.com.
- The Global Leaders Fund has been approved for promotion in South Africa under Section 65 of the Collective Investment Schemes Control Act 2002. The Fund Prospectus, and further information including pricing and charges, may be viewed at the Fund’s representative office in South Africa: Ashburton Management Company (RF) Proprietary Limited (“Ashburton CIS”), 3rd Floor, 4 Merchant Place, 1 Fredman Drive, Sandton 2196. Ashburton CIS is an approved collective investment schemes manager regulated by the Financial Sector Conduct Authority and a full member of the Association of Saving and Investments South Africa.
- Not all products and services described in this document are available in all jurisdictions and some are available on a limited basis only due to local regulatory and legal requirements. The material contained herein is not intended for use by persons located in or resident jurisdictions which restrict its distribution. Persons accessing this document are required to inform themselves about and observe any relevant restrictions.