3 Stock Picks with Growth Potential

VIDEO: Killik & Co's Rachel Winter looks at three stocks she thinks have the potential to keep delivering into 2020 and beyond

Holly Black 9 December, 2019 | 10:03AM



Holly Black: Welcome to the Morningstar series "3 Stock Picks." I'm Holly Black. With me is Rachel Winter. She is Investment Director at Killik & Co. Hello.

Rachel Winter: Hello, good morning.

Black: So, what three stocks have you got for us today?

Winter: First one today is Nestlé. So, a very familiar brand, huge global food and beverage company. In fact, it's the biggest in the world. It owns 2,000 different brands, including Kit Kat Nespresso, Purina, the pet food brands. So, because this company is so big, you could almost liken it to an oil tanker. It's huge, and it's very difficult to change. However, it did get a new chief executive back in 2017, the first external chief executive they've had in over a century, and we're starting to see some very good results coming through from him. So, he is called Mark Schneider. He came from a healthcare company called Fresenius. He had a really successful track record over there. And now, he's starting to bring some of those healthcare expertise to Nestlé and we're starting to see the company move more towards wellness and nutrition. We think that's a great space to be in. And therefore, we are quite excited about where Nestlé is going.

Black: You talk about not being able to change a company, but I'm going to say I don't really associate Kit Kats and healthcare with the same...

Winter: Very true. Nestlé did previously have a huge presence in the snack food market. And they are starting to come away from that. So, I don't think they'll be selling the Kit Kat, but they have started to come away from some of those unhealthy snacks. Also, they had a business called Herta which had sort of cold meats and cold cuts, which wasn't seen as particularly healthy. They're also starting to look at getting rid of that. So, I think they really are starting to move in the right direction.

Black: Cool. Okay. What's stock number two?

Winter: Next one is Accenture. Again, a brand I think we'll all be quite familiar with. This is one of the world's largest consulting firms with a particular expertise in technology. Now, we've probably talked about this stock on this video before possibly more than once, but I think it's important to keep revisiting these names, and to make the point that we do still like them, despite the fact that the share price has come up a huge amount. So, this share price has probably more than doubled since 2017 and yet the company is still achieving huge amounts of growth. So, Accenture, it has a huge expertise in cloud computing, digitalisation and digital strategy and also, cybersecurity. So, those are number of areas that we think are really important for the future. And Accenture is really helping small and large companies to become experts in those spaces.

Black: Perhaps one of the hardest things to do as an investor sometimes, isn't it, run your winners?

Winter: It is and when you see that you've got a huge profit on a company, it's very tempting to sell. But I think, as you say, the golden rule is, to cut your losers and to run your winners. And that's what we're trying to do here with Accenture.

Black: Okay. And final stock for the day?

Winter: Final one is Abbott Laboratories. Again, it's probably a company we've talked about before. It's a US healthcare company with good exposure to nutrition, diagnostics and medical devices. And those are three areas of healthcare that we really do feel quite excited about. At the moment, for Abbott Laboratories, we're particularly excited about their exposure to diabetes. So, they have a glucose monitor, which just attaches to someone's skin, no need for needles, it monitors glucose, and it sends a reading directly to that patient's phone. So, really convenient for diabetic patients. And we just think this market has so much potential. So, at the moment, there are 450 million diabetics in the world, most of which have type 2 diabetes, which would be using this glucose monitor. It's predicted that by the year 2045, there will be 629 million diabetics in the world. So huge, huge numbers here. And at the moment, about 1.5 million are using this particular monitor. And the growth potential we think is absolutely huge.

Black: Well, it's all part of this prevention rather than cure technique, isn't it, that companies are trying to harness because if you can manage it properly, it doesn't get worse?

Winter: Exactly. So, rather than taking loads of medication, it's much better and much cheaper in the long run, that these diabetic patients can manage their own conditions using glucose monitors such as these. So, I think there really is a huge growth opportunity here.

Black: Well, thank you so much for your time.

Winter: You're welcome.

Black: And thanks for joining us.

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.

About Author

Holly Black  is Senior Editor, Morningstar.co.uk

Audience Confirmation

By clicking 'accept' I acknowledge that this website uses cookies and other technologies to tailor my experience and understand how I and other visitors use our site. See 'Cookie Consent' for more detail.

  • Other Morningstar Websites