To say it has been a difficult year for investors would be a gross understatement. However many portfolios, though battle-scarred, have survived and the benefits of diversification have never been clearer. Here we have picked out three investment ideas that have not only survived the challenges of 2020 but could be set for a late flourish as the year closes out.
GBP (versus Euro)
Remember Brexit? The 12-month transition period of the UK leaving the EU ends on December 31 but talk of Brexit has been largely (and understandably) replaced by the coronavirus pandemic. However, 1 January 2021 is not far away, and we will likely find out in November if a deal can in fact be struck between Westminster and Brussels.
Due to political uncertainty, UK sterling has been suffering since the 2016 referendum and in early 2020 the currency lost more (by 5.5% versus the Euro in February and March) as the pandemic started to impact the British economy. The market has become increasingly reluctant to buy into sterling but there is still a chance of relief before the end of the year, with £1 worth €1.11 in early November.
As both the EU and UK negotiators remain committed to talks, a recent note by Goldman Sachs analysts remarked that they were feeling quietly optimistic about a last-minute deal being reached. Citing sources that suggest talks are moving into a “quieter” technical phase, with official working texts even being drafted up, there is a narrative that sterling could receive a significant boost at the eleventh hour. Sterling could of course still strengthen in a no-deal scenario, but the guidance and security of a deal would give the market much-needed reassurance that could benefit GBP vs EUR trades.
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Honeywell International, a US-based industrial conglomerate, suffered in 2020 due to much of its business being in the aerospace and defence sector. Millions of flights have been, and continue to be, grounded, which has impacted demand for planes and parts and meant Honeywell’s Q3 sales in this sector were down 25% from 2019.
However, Honeywell is extremely diversified, operating in manufacturing, retail, chemicals and supply chain logistics to name a few areas. For instance, sales in its safety and productions solutions arm (responsible for PPE manufacturing) was up 8% in Q3. At the same time, Honeywell’s management have been working hard to ensure the group is as prepared as possible for future shocks and are aggressively pursuing cost savings of $1.6bn.
This management mindset has helped Honeywell stay in good shape. Although the group suspended its guidance in Q1, it recently brought this back and forecasts earnings per share of between $7 and $7.05 by the end of the year. Honeywell also has a very comfortable cash position to the tune of $15bn meaning it has more than enough to ride out difficult periods and invest where needed. Over six months the share price has responded favourably, from $132.5 on 7 May to $184 by early November.
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Even if you have not bought any Unilever shares this year, the odds are you will have some Unilever brands in your house. This (for the time being) UK-Dutch giant owns names including PG Tips, Dove, Domestos, Bovril, Cif, Bertolli and Slim-Fast, and therefore commands real market share in the consumer goods space. This kind of name recognition has provided protection as many of these goods are still being purchased even in difficult financial periods.
This has helped the business stay in good shape this year and its Q3 numbers give several reasons to be optimistic. In the third quarter underlying sales growth was up 4.4% from 2019 and although turnover was down slightly during this time by 2.4% but this was still €12.9bn. Boosted by the fact it sells over 400 brands in 190 countries, Unilever was still able to maintain a quarterly dividend of €0.4104 a share.
This has all helped Unilever’s share price creep up this year, from £41.68 on 11 May to £46.75 in early November. However, the group may be set for more upside in November as it moves from being a Anglo-Dutch company to a fully UK entity following regulatory approval. The group is hoping to become more efficient and cost-effective as a result. Although it remains to be seen if a potential ‘exit tax’ from the Dutch authorities materialises, this could be a potential watershed moment for the company and its shareholders.
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