Is now the time to back financials?
Investing in financials has long divided opinion. Traditional financial stocks – such as banks...
This week’s mini-Budget from Chancellor Rishi Sunak was all about the government’s ‘Plan for Jobs’.
With 9 million Brits currently on furlough, and more young people about to leave education and enter the employment market, his focus was on protecting, supporting and creating jobs.
His ‘Great British Give Away’ included £1,000 incentives for businesses to bring back furloughed workers and ‘Kick Start’ schemes for companies that create roles for the under 25s, as well as traineeship and apprenticeship bonuses.
There are also three main areas where investors too could benefit from the announcements: the green recovery, the cut in stamp duty to boost the housing market and hospitality and tourism.
With historic infrastructure spend, newly created green jobs and a £2 billion green homes grant to make homes more energy efficient, funds investing in renewable energy and the energy efficiency supply chain are all set to benefit.
1. Ninety One Global Environment is only six months old but is genuinely unique, investing only in companies that are contributing to the decarbonisation of the world economy. As well as avoiding creating carbon emissions, companies will also have to have at least 50% of their revenues from three sectors: renewable energy; efficient use of resources, and electrification.
2. VT Gravis UK Infrastructure Income invests in all kinds of infrastructure, with many underlying projects backed by the government. A third* of the fund is currently in solar wind and energy storage solutions. In his recent podcast, Wil Argent told us how infrastructure investment will play an important role in the post-crisis economic recovery.
3. Pictet Global Environmental Opportunities has identified nine environmental challenges and all companies within the portfolio must operate within a safe operating space for each of these nine areas and actively contribute to solving environmental challenges. It currently has 13%* invested in the area of energy efficiency.
With thousands of pounds to be saved in stamp duty over the next six months for purchases under £500,000, the hope is that more people will buy houses and choose to spend the saved money on furnishings or improvements or something else – in order to help revive the massive drop-off in consumer spending during lockdown. This should be a boost for house builders, estate agents and builders’ merchants to name a few.
1. Threadneedle UK Extended Alpha is well-positioned for this boost, with holdings in Ferguson Plc (plumbing & heating products), Grainger (UK’s largest residential landlord), Berkley Group, Persimmon Homes and Crest Nicholson (all housebuilders), Howden Joinery and Breedon Group (building materials)**.
2. MI Chelverton UK Equity Growth with its small and mid-cap bias, is more set for home improvements with holdings in Travis Perkins, DFS, Topps Tiles, Tyman (windows and doors) and Inland Homes (a brownfield developer)***.
3. Mark Wright, co-manager of the VT Seneca Diversified Income fund, told us how the team scooped up Purplebricks, the online estate agent, in the recent market sell-off, in his podcast. He also described the fund’s other property holdings.
We’re also being encouraged to enjoy summer safely with staycations and to ‘eat out to help out’ in pubs, restaurants and cafes, with temporary VAT reductions on accommodation, food and attractions, and vouchers off mid-week meals in August.
1. Baillie Gifford Strategic Bond is set to benefit if people do venture out – it holds the bonds of Merlin Entertainments (the owner of Alton Towers and Chessington World of Adventures), Whitbread (Premier Inn owner) and Greene King, the pub and restaurant operator**.
2. Marlborough Multi Cap Income owns the shares of Cineworld, Secure Income REIT (which itself owns a few hotels including Travelodge) and PPHE Hotels (Park Plaza Hotels)^.
3. Royal London UK Equity Income also owns Cineworld and has a holding in Restaurant Group – the owner of Wagamamas, Frankie & Benny’s and Garfunkel’s restaurants, all lower-priced offerings that may attract customers even if people are being more prudent in their spending^^.
*Source: fund factsheet, as at 31 May 2020
**Source: FE Analytics, full portfolio listings, 30 April 2020
***Source: FE Analytics, full portfolio listings, 29 May 2020
^Source: Marlborough Fund Managers 8 July 2020
^^Source: Royal London Asset Management webinar June 2020