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Fund managers reveal the shares they’d like to see in their stockings

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24/12/2019
While the kids excitedly wait to see what Santa leaves for them on Christmas morning, these fund managers are hoping for a stocking full of their favourite shares.

Aptiv

Tom Fitzgerald, manager of the Amity International fund at EdenTree Investment Management

As the automotive industry continues to move towards electrification and autonomy, vehicles are becoming increasingly complex. The associated changes in software, computing power and data processing require new architectures to support them. Aptiv is a global technology company that develops these safer, greener and more connected technology solutions for cars.

The company’s product portfolio matches key technological shifts in the automotive industry, while addressing some pressing socioeconomic challenges. Currently, there are 1.3 million deaths every year linked to road accidents, while globally, the transport sector is responsible for 24% of emissions.

Rising technology demands should drive material structural growth across Aptiv’s product portfolio, which is focused on hardware, software, integration, power distribution and data analytics. The company’s well-established market positioning and ability to integrate the hardware, software and data analytics into one complete system are meaningful competitive advantages.

Aptiv currently trades at a sector multiple of 15x 2020 consensus earnings, despite the company’s leadership position within respective markets, a superior margin and cash flow generation profile relative to peers.

Sonic Healthcare

Alex Hunter, global equity analyst & portfolio manager at Sarasin & Partners

A staggering amount of money is wasted in the healthcare sector, which has not yet adapted to the challenge of an older population. The overwhelming focus remains on sickness over wellness, with 97% of expenditure spent on the treatment of illness and only 3% going to prevention and public health awareness.

Better and more cost-effective diagnosis is enabled by companies such as Australian-listed diagnostics company Sonic Healthcare. This is one of only a handful of providers in an industry with high barriers to entry. Sonic remains a reliable oligopoly for lab testing, where there exist two pressing necessities in a world with increasing test volumes – being cheap and being highly accurate.

Kerry Group

Thomas Sørensen and Henning Padberg – portfolio managers of Nordea’s Climate and Environment strategy

The transition from oil/synthetic towards natural/bio-based products – driven by increased environmental awareness and a desire for consumers to positively impact the environment – is now underway. The demand for eco-friendly products is growing strongly and natural and organic products are gaining market share in many countries around the world.

In order to capture the growing ‘green consumerism’ trend, we have invested in a number of natural ingredients and sustainable packing companies. These solution providers are the key enablers of the trend and we believe these companies will enjoy healthy growth.

Irish company Kerry Group specialises in providing natural ingredients to replace artificial additives. Branded food companies want to address the consumer desire for eco-friendly, healthy and convenient food. This means they will need to ‘clean’ up food labels, given people want to know what they are eating. Innovation is likely to increase, yet few companies can deliver natural ingredients that do not alter the taste and feel of a product. Kerry’s extensive knowledge allows it to provide clients with the needed solutions.

Intel

Chris Elliott, co-manager of Evenlode Global Income fund

Over the long term, a key factor to consider is a company’s ability to innovate and face down disruption. Intel, the US based chip-manufacturer, invests heavily in the development of new processors for use in computers globally. Intel has also demonstrated a willingness to expand into adjacencies (such as Optane memory or neural network processors) allowing it to shift from the now shrinking PC market into the rapidly growing datacentre market.

Similarly, European eye-care manufacturer EssilorLuxottica has demonstrated an intent to innovate; creating lenses that fight the progression of myopia and reading glasses that can be switched to sunglasses at the push of a smartphone button. This willingness to invest in pushing the boundaries of technologies is a key factor in maintaining a strong market position over a long time period.

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