3 Stock Picks for Future Growth

Killik's senior investment manager Rachel Winter looks at stocks benefiting from global trends such as the rise of the Asian middle class and the fourth industrial revolution

Rachel Winter 10 May, 2019 | 1:15PM

 

 

Rachel Winter: We’ve been looking at a company called Shiseido (4911), which is the largest cosmetics company in Japan and the fifth largest in the world. The market for cosmetics has expanded significantly over the last few years, largely due to the popularity of selfies and the perceived need to be camera ready at all times, as well as the prevalence of make-up tutorials on platforms such as YouTube.

Shiseido was founded back in 1872 and is currently in the middle of a successful turnaround, having lost its way in the years following the financial crisis. It has since employed a new chief executive who has returned the company to growth by investing in a new global innovation centre and an extensive digital marketing campaign which has helped the brand to engage with younger consumers.

Over three quarters of revenue comes from Asia, which fits with our objective to invest in the growth of the Asian middle class.

It may feel as though e-commerce and digital payments have been around for years, but arguably the markets are still in their infancy and there is huge opportunity for continued growth. Less than 15% of global retail sales currently take place online. The market for businesses to business payments can almost be considered archaic, with a significant proportion of payments still being made by cheque.

We’re investing in PayPal (PYPL), which is a leading enabler of digital and mobile payments. It currently has 247 million active consumer accounts and is successfully expanding into business to business payments. PayPal has strong relationships with card networks such as Visa and MasterCard, as well as technology players such as Google and Facebook. The company’s earnings are currently growing at over 20% per year and this looks set to continue for the foreseeable future.

The fourth industrial revolution continues to be one of our key investment themes, and we like to invest in companies that are disrupting existing industrial processes with software and automation.

We like a company called Trimble (TRMB), which offers technology solutions to various sectors. For example, it produces software for plumbers in the construction industry which helps them to virtually lay out the pipes and components that they need. It also produces equipment and software for farmers which helps them to analyse their soil, decide what would be best to plant in it, and then work out the most effective amounts of water and fertiliser to use. These sorts of technology can generate huge efficiency gains, and in our view Trimble should be a major beneficiary of the fourth industrial revolution.

 

 

The information contained within is for educational and informational purposes ONLY. It is not intended nor should it be considered an invitation or inducement to buy or sell a security or securities noted within nor should it be viewed as a communication intended to persuade or incite you to buy or sell security or securities noted within. Any commentary provided is the opinion of the author and should not be considered a personalised recommendation. The information contained within should not be a person's sole basis for making an investment decision. Please contact your financial professional before making an investment decision.

Securities Mentioned in Article

Security NamePriceChange (%)Morningstar
Rating
PayPal Holdings Inc117.17 USD0.86
Shiseido Co Ltd8,553.00 JPY0.39
Trimble Inc42.81 USD0.20

About Author

Rachel Winter  is senior investment manager at Killik

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