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Opportunity for consistent returns in volatile market?

Updated: Feb 12, 2021

There's been a flurry of very informative investing webinar updates over the last fortnight. This is a quick recap of what i learned from an excellent recent talk by Rosemary Kelly of Gillen Markets. As always I just tuned in as a novice investor and these aren't recommendations from Gillen nor I.

Kelly highlighted the opportunities of global consumer franchise stocks n these volatile times.

  1. Who are these: these type of companies are defensive consumer stocks which include the makers of Pringles - Kelloggs, Unilever, Diageo and Colgate. These stocks have global diversification with a global footprint across 100+ countries in some cases.

  2. Low sensitivity: they sell low priced everyday essentials. As they are relatively low priced items, they aren't a massive purchasing decision and they aren't as sensitive to general economic activity as other stocks.

  3. Consistency: They have been a very consistent resilient performer over the last 20+ years; e.g they outperformed the wider market during the dotcom crash and financial crash. The below highlights the performance of consumer staples against the FTSE world index and it's out performance of it.

4. Dividends: Coca Cola's dividends alone if you were investing between 1999 and 2019 produced a 100% return on your investment. This was due to their strong earnings growth delivering compound annual dividends of 8.6%. (However they'd need to have as their share price hovered at much the same rate for those 20 years due to insane valuations in the 90's.) .

5. Guinness is good for your returns: Diageo has delivered a growth rate in terms of dividend of 6% compound per annum and if you compare this to a bond where it’s return is fixed, it compares very favourably.

6. Bleach to condoms: European examples of these stocks include Reckitt Benckiser, the owner of Dettol, Calgon and Durex.

7. Return versus bonds: As a dividend producing sector it provides value when you consider the comparison of bond yields which were previously at the start of the century providing returns of 5% which are now at 0-1%. These consumer stocks produce an average of 2.5% dividend yield.

8. Pricing: while they are marginally higher in terms of their p/e ratio than their average and the overall market, they offer value because of their steady earnings growth and dividends

9. ETF: this is an example of an ETF which you could buy if you are interested in this sector and opportunity: SPDR® MSCI World Consumer Staples UCITS ETF.

*As always these are just the brief notes of a novice investor and with that there may be some mistakes, please do your own research and i'd highly recommend signing up to the newsletter of Gillen Markets as they delve into these topics in more detail.*

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