3 Sustainable Stock Picks

VIDEO: Trustpilot, Kornit Digital and Zur Rose are three stocks being discussed in the virtual studio today 

Holly Black 18 August, 2021 | 9:36AM
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Holly Black: Welcome to Morningstar's "3 Stock Picks". I'm Holly Black. With me is Malcolm McPartlin. He is manager of the Aegon Global Sustainable Equity Fund.


Malcolm McPartlin: Hi Holly.

Black: So, you've got three stocks from the portfolio for us today, where should we start?

McPartlin: Let's start with our biggest position Kornit Digital. Kornit addressed massive environmental challenge. That is the lack of sustainability in the fashion industry and clothes production overall. So traditional manufacturing of textiles is extremely water intensive, the sort of dyeing, printing and finishing stages, uses roughly 20% of global wastewater. And that's a 5 trillion litres, which I'm led to believe is two Mediterranean oceans every year. And this problem extends beyond the manufacturing process. Water waste is often not treated to remove some of the pollutants, so it's damaging to the environment. So Kornit's technology provides a transformational solution to this problem. And they've developed a waterless inkjet printing technology where you print colour or pattern directly onto fabric, it uses no water, it produces no hazardous waste. And over and above those really neat benefits, Kornit's technology allows smaller print runs more accurate management of inventory. So what we're seeing is a shift from quite long supply chains into developing world on to onshore nearshore production. And again, removing sort of environmental footprint of shipping clothes around the world. So a real gem of a sustainable stock in the portfolio.

Black: Yeah, really interesting one, okay, we'll try and beat that. What's the stock number two? 

McPartlin: And the second stock that we really like is called Zur Rose. We're very excited by the medium-term prospects for Zur Rose. They are an online pharmacy serving Germany and Switzerland and they've developed a healthcare platform and recently acquired a telehealth service. So we get a doctor consultation online. The idea behind electronic prescription, patients get a prescription on their mobile or QR code and they order prescription and it arrives at home. And there's a clear sustainable benefit to society from this. Unlike paper prescriptions, electronic prescribing leaves no scope for interpretation cannot be forged, increases patient safety. Many patients especially the chronically ill, the elderly, you know going to the pharmacy can actually be quite an ordeal and quite a big inconvenience. So this is a real convenience driver and in some cases a real improver of quality of life for some individuals. And there's major cost efficiencies to the system. The current physical system is highly inefficient and costly. And so, hopefully it frees up some costs in the German health system secularly and can be reinvested.

Black: Okay, what is our final stock. 

McPartlin: The final stock is company called Trustpilot, which you may have heard of, it's a recent IPO in the U.K. market, again, a really exciting business. So they are the world's largest independent consumer review website. They've got reviews of something like 500,000 websites, and over 120 million reviews. The business model is offering the website for free to the consumer to share their experiences of both products and services and to provide feedback, and then monetize that by offering a subscription to businesses that can consume these reviews, feedback, engage with consumers to get data and analytics in terms of where customers are not happy so they can improve their own position. And crucially, they are allowed to use Trustpilot logo on their adverts, which I'm sure most people have seen. And that's a really powerful advertising technique.

And we like the sustainable benefits for Trustpilot. We think Trustpilot acts as a source of truth, a source of trust, and really a source of consumer protection and a force of good for the consumer. And they allow small and medium businesses to compete against large corporates based on good quality of service. So we really like the company. There's lots of headroom for growth, they're quite mature in their core market, Denmark. They are growing rapidly in the U.K. And they're very early stage in Europe and the U.S. And there's a huge headroom for growth there. And my final point on Trustpilot one of the reasons we like it, one of the most memorable reasons we like it, the chief exec gave one of my colleagues a high five in initial company meeting a couple of years ago, so we thought that always stood out for us. 

Black: Malcolm, thank you so much for your time. From Morningstar I'm Holly Black.

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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Holly Black  is Senior Editor, Morningstar.co.uk


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