Ashburton’s global fund manager identifies gems in the rubble

One of Ashburton Investment’s global fund managers has identified four stocks that have been aggressively sold off in the recent market rout but are now offering attractive valuations for long term investors. 

Kathy Davey, an investment manager for the Ashburton Global Leaders Equity Fund which invests in the world’s most prominent mega-cap companies like Alphabet, Visa and Microsoft, noted that the recent sell off “had spared nothing in its wake.”

“When there is indiscriminate, panicky selling there are always opportunities. In this bear market there are excellent stocks in the bargain bin that we think will likely provide investors with market beating returns over the longer term.”

Davey noted that some were already held in the Ashburton Global Leaders Equity Fund but were worth adding to at these levels and into further weakness. 

The stocks are: 

Johnson & Johnson. 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. 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. 

Visa. Visa is the leading payments technology companies and appears far ahead of competitors in terms of its scale and reach, and it services thousands of financial intermediaries globally. Earnings are expected to grow in the high teens over the foreseeable future.

The company benefits from secular growth in online payments and increased operating efficiencies supported by technology capacity that continues to become cheaper (known as Moore’s law). The company is also highly cash generative. Despite regulatory and competitive risks, we like the payments space as a capital light, long term growth industry. 

Home Depot. Home Depot is the market leader in home improvement in the United States (US), however, the market is large at $650 billion and remains relatively fragmented with much opportunity.

Home Depot has a strong competitive advantage that would be difficult for a competitor to replicate which is the sheer size of its footprint – 90% of the US population lives within 10 miles of a Home Depot store. Even so, the company is working on further increasing its edge over its peers in order to gain more market share through an investment programme designed at improving its stores, online offering and the speed and efficiency of its supply chain. We expect medium to long term growth to be supported from the investments made over the past few years.

NXP Semiconductor. NXP is a Nasdaq listed, European based Global semiconductor company. It supplies semiconductors to several key markets that are beneficiaries of a broad cyclical upturn, but also key is that the company is a beneficiary of a number of long-term secular themes. These are ADAS (automotive driver assisted steering) and electric vehicles, the 5G cycle which we are on the cusp of, the Internet of Things (IoT) (such as smart homes, smart meters, robotics) as well as mobile communication infrastructure. 

Given the business is domiciled in Eindhoven, Netherlands they may expect to make business wins at the expense of similar US companies as China increasingly seeks to avoid US businesses as a way to mitigate disruption from trade disputes. This is ongoing, and with NXP seeking to be No1 or at least No2 in the markets it serves places the business in a strong position given this and the secular dynamics at play.



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