3 Ethical Stock Tips

Jupiter Ecology fund manager Charlie Thomas gives his three stock tips for investing ethically and profitably

Emma Wall 15 October, 2013 | 6:30AM
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Read more on ethical and sustainable investing in Morningstar's Ethical Investing Week 2013.

Emma Wall: Hello, and welcome to Morningstar TV. I'm Emma Wall, and here with me today to give his three stock tips is Charlie Thomas, Manager of the Jupiter Ecology Fund.

Hello, Charlie.

Charlie Thomas: Hi.

Wall: So, what’s your first stock tip?

Thomas: My first stock pick is actually an American company called Whole Foods Markets. It's a leading organic and natural food supermarket chain, primarily based in the U.S. or actually North America, indeed with some supermarkets here in U.K. and indeed in London. I think, what’s very interesting from us from an investment perspective is this is a company, which is really tapping into a secular growth story, which is the consumer is becoming much more aware about the type of food, the quality of food and that is resulting a very, very strong growth trends. Indeed if you look in the U.S., we’re seeing about 10% growth rates in the natural and organic growth sector, which is very much driving the potential for the company.

Wall: Organic and free range are no longer just for the elite, it's now for the masses, isn’t it?

Thomas: It is increasingly. Yes, there is in certain areas of premium, but increasing that premium is decreasing. And that's allowing greater penetration, but we got to remember the penetration rates is – of organic and natural food actually are very low in U.S. Today, they only stand around about 4.5% to 5% of the home food market. So, there is a huge amount of the market to go for.

Wall: Is the stuff not expensive there?

Thomas: It is. It is more expensive, but increasing what we're finding and what we have from surveys that consumer is actually prepared to pay an increasing premium for quality. And that's a very interesting secular growth story, which I think is going to start to stay.

Wall: And your second stock?

Thomas: My second stock pick is a company called Eurofins Scientific, a French company, which is a world leading in testing, so testing water, testing environmental issues, testing food and testing pharmaceuticals. It's a very interesting area where we're seeing a lot of growth at the moment, as we see scandals like ‘horsegate’, really pushed the demand for increasing testing and to ensure the people are consuming what they think they are. This is a company, which is probably growing at round about 30% a year. And we think is our real great opportunity as the world of testing expands globally and into new areas.

Wall: And what are the risks with this stock?

Thomas: I think one of the risks that we have with the company is perhaps its rating. It is on a high rating, but then it has a very strong growth rate, but that is something we got to recognize. Also, this is a company, which is developed through acquisition, and acquisitions carry risks. We must understand that. What we're not worried by is the underlying growth rate. We think that the world is going to test more, and particularly in the areas where this company is positioned.

Wall: What’s your third stock?

Thomas: My third stock pick is a very, very long-standing company we've had in the portfolio, actually close to probably 20 years. It's a U.K. company called RPS. It's an environmental consultant and it's a real leading company in terms of providing companies and governments advice on energy, on water and indeed on development. It's a mid-cap company here in the U.K. with strong balance sheet, very, very long-standing management which we like from an investment perspective, and is also driven by acquisitions as it expands globally into new markets, particularly in North America and increasingly in South America.

Wall: So, it's not dependent then on domestic GDP?

Thomas: It is not dependent on domestic GDP. It's dependent on issues like energy and water, which we think there is a very strong secular growth story, which are probably going to grow quicker than the underlying GDP, and that why we continue to hold it.

Wall: Charlie, thank you very much.

Thomas: Thank you.

Wall: This is Emma Wall for Morningstar TV. Thank you for watching.

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.

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Emma Wall  is former Senior International Editor for Morningstar