Keynes Goes Shopping: 10 Things We Learned This Week

As our special report week on income investing comes to a close, we recap some key (and quirky) lessons from five days of focused content

Ollie Smith 26 November, 2021 | 2:12PM
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John Keynes and his wife go shopping

Here are 10 things we learned during income week:

Higher Yields Could be a Trap

This rule of thumb may be obvious to income investor veterans, but we wanted to point it out to beginners less familiar with some of the risks. As Ninety One product specialist and our guest income guru Ellie Clapton noted in this explainer video, yields are a real stumbling block for the amateur investor. “We find that the best mix of returns, particularly when viewed alongside measures of risk, sit within those yields that are higher than average, but not necessarily the highest,” she said.

Moats Maketh the Money

On Monday, Morningstar data journalist Sunniva Kolostyak looked at equity income funds beloved of the Morningstar analysts team. Top of the list was the Trojan Global Income fund, whose concentrated portfolio of 34 stocks includes a category-divergent 40% allocation to consumer staples. 90% of the portfolio itself has a moat rating, 80% of it wide.

Viva Aviva, the Insurer Showing Strength After a Blanc Page

It wasn’t too long ago that Aviva was facing media scrutiny over its leadership turnover. Not so much today. As an income stock, Aviva has proven a healthy option for dividend hunters, and, as James Gard explored in his video on the company this week, Morningstar analysts now believe payouts at the insurance, pensions and asset management giant will grow to just under £1 billion in 2022/23. New(ish) CEO Amanda Blanc’s corporate transformation programme continues, and our analysts anticipate the company will have around £400 million to invest in its operations in future.

Soaring Stocks Aren’t Enough For This Manager

It would not have been income week without some form of Q&A with an income manager. This week, Charles Hamieh, co-manager of the Morningstar 5-star rated ClearBridge Global Infrastructure Income fund, discussed the success of infrastructure investing in airports. But forget building them, he would personally rather be using one as a pilot. Check out our sit-down with him here.

People Do Want to Chat About Financial Education

Our column on financial education asked why adults have proven themselves so untrustworthy when it comes to teaching children (and other adults) about money. And yes, it would’ve been remiss to forget the input of US comedian Bo Burnham, whose take on the ills of the internet is as relevant to investing and learning as it is to politics and culture. The piece has prompted a modest but positive outpouring of interest from financial professionals keen to learn more. Watch this space.

Good Income ETFs Are Tech ETFs

There’s an exchange-traded fund (ETF) for everything these days, and that goes for income too. But Sunniva Kolostyak’s look at some of the best income ETFs showed just how well exposed to the technology world those strategies are. Fidelity Emerging Markets Quality Income (FEMI), for instance, invests nearly half of its portfolio in emerging Asia. Biggest holdings include Tencent and Samsung at 4.87% and 4.70% of the fund, respectively.

Buffett-Backed Heinz is Still Having A Thoroughly Saucy 2021

Warren Buffett may have thought Berkshire Hathaway paid too much for the Kraft bit of the legendary Kraft-Heinz deal, but the company overall is proving extremely resilient in tough times. As Susan Dzuibinski explored this week, Morningstar’s assessment of the food giant is still pretty positive. “Rampant cost pressures, supply-chain disruptions, and stepped-up competition did not derail no-moat Kraft Heinz’s performance in the third quarter; we attribute its results to the foresight to set out on a revised strategic course even before the pandemic took hold. Organic sales edged up 1.3% versus a year ago and impressively jumped 7.6% relative to the pre-pandemic period in 2019,” says analyst Erin Lash.

You Might *Just* Be Able to Picture Keynes Enjoying Black Friday

In the absence of decent interest rates on their savings accounts, and a risk appetite for investing in markets, consumers could perhaps be forgiven for wanting to spend a bit of their cash instead. So argued resident Morningstar devil’s advocate James Gard this week, in his exploration of our obsession with cash. In the era of Sunakonomics, our hedge fund veteran-turned chancellor owes a lot to the work of John Maynard Keynes, but then again we all do. One can only wonder what Keynes would have bought on Black Friday. Perhaps a new moustache trimmer?

UK Income Funds Are Still Really, Really, Really, Unloved

Ok, we get it, UK income funds are not exactly flavour of the month, so if you’re an income investor and you don’t like reading depressing flows figures, skip ahead. This week, Sunniva Kolostyak found that, in the past month alone, UK equity income funds have haemorrhaged another £664 million (net). And, as 2021 limps towards its end, total outflows for the year are hurtling towards the £7 billion mark. Income all ye faithful, joyful and triumphant? Hardly so.

Fever-Tree Hype is at Feverpitch

People want it in their drinks, and investment trust bosses are putting their trust in it to add a bit of razzle dazzle to their portfolios. None more so than phenomenal long-term outperformer Finsbury Growth & Income (FGT), whose glowing assessment of drinks company Fever-Tree argues it is a product leader with a fair few rounds left to run. “Whatever the spirit, Fever-Tree has the mixer to match it, and as the only premium mixer brand with global recognition and scale it remains a partner of choice for these demanding, prestige-conscious companies,” the Nick Train-led Trust says. G-income and tonic anyone?

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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Ollie Smith

Ollie Smith  is editor of Morningstar UK

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