14 February 2022
With inflation at its highest level in over thirty years, investing in the stock market is trickier than it has been for a long time because the current high inflationary, low interest environment has led to market volatility and uncertainty. At the same time, investors need to make their money work harder for them. The key to this is having a diversified portfolio which can bear the brunt of unpredictable changes in the market. John Moore, senior investment manager at wealth manager Brewin Dolphin, highlights the top stocks, funds and investment trusts that you could consider adding to your portfolio.
1. Durable consumer brands: Unilever, Nestle, Diageo, and Heineken
These are companies that historically have been considered as “defensive” stocks. Household names such as Unilever, Nestle, Diageo, and Heineken could be a reliable addition to anyone’s investment portfolio. Their products are regarded as non-luxury, small ticket items such as nappies, toilet paper, dishwasher tablets and non-perishable food goods such as mayonnaise and tomato ketchup. Consumers typically continue to buy these products no matter what the inflationary environment looks like, and even if the price of these goods continues to rise. One word of caution though, these businesses think long term and might take on short term pain in order to get to their desired objective, so there can be bumps along the way. These stocks have strong, efficient supply chains and long-term pricing power. They also offer an income yield between 2-3% a year to investors while they wait to deliver capital upside.
2. Healthcare: BB Healthcare Trust, Worldwide Healthcare Trust and Polar Capital Global Healthcare Trust
If you are looking at sectors that should offer resilience against inflation and have good pricing power, healthcare and pharmaceuticals traditionally fall into this bracket. Also, if there is one thing that the pandemic has shown, it is the importance of healthcare spend and innovation. The constant technological developments in biotech and artificial intelligence have ensured that large healthcare and pharmaceuticals providers are at the forefront of innovation.
In the current market, it is best to look at funds or trusts, rather than individual stocks. BB Healthcare Trust offers exposure to some of the more entrepreneurial names in the sector and an income yield of around 3% a year. On the other hand, Worldwide Healthcare Trust and the Polar Capital Global Healthcare Trust are also worth considering as they invest in more established and well-known companies. It is worth watching the Worldwide Healthcare Trust as it has some relative performance to make up in the short term to protect its excellent long-term record.
3. Specialist property: TR Property Investment Trust
When constructing a diversified portfolio that can potentially protect the real value of your capital, investors should consider real estate. However, the last 18 months have challenged some perceptions of the sector and the relevance of commercial property, in particular retail and office space. While the high street may have had a tough time during lock down, supermarkets did not and along with logistics warehouses, which are essential to online offerings, the demand for these assets are a good inflation protection due to their long lead times on rental income. There are also niche areas that are seeing much needed growth such as private rented property, healthcare and support care facilities. Faced with such choice and specialisation you could consider TR Property Investment Trust as it invests in real estate within healthcare, supermarket assets, student and social housing, storage boxes, and logistics warehouses.
4. High quality companies: Microsoft, Estee Lauder, Alphabet, Apple, LVMH and Thermo Fisher
Every investor should have some high quality stocks in their portfolio. These are businesses that typically generate high returns on the capital that they deploy, that are well financed and therefore can invest in organic growth opportunities or select acquisitions. Microsoft is a good example of this with the recently announced acquisition of Activision Blizzard looking well timed. Others in this space might include Estee Lauder, Google owner Alphabet, Apple, LVMH and medical device company Thermo Fisher.
5. Funds profiting from monetary policy change: Personal Assets Trust, Ruffer and BH Macro
Another area to consider including in your investment portfolio are investment trusts and funds that have the flexibility to profit from monetary policy change. We are facing rising inflation and that is impacting stock markets, at a simple level investors need to provide a hedge against the impact of inflation. Gold is often thought of as the textbook hedge, but investors could consider Bitcoin and other alternative currencies. A more balanced approach could be looking to invest in investment trusts such as Personal Assets Trust or Ruffer which blend gold with inflation-linked bonds, high quality companies and alternative assets; the latter has also dabbled in Bitcoin. If you prefer an even more specialist approach, then consider looking at BH Macro that is managed by Brevan Howard, one of the leading hedge funds managers. This investment trust offers access to underlying funds that typically benefit from changes in interest rates and volatility so while not a focused inflation hedge, it is well placed to capture some of the potential fall out and change that might happen and the trust has a low to negative correlation to equity markets.
Disclaimers:
- The value of investments, and any income from them, can fall and you may get back less than you invested. Information is provided only as an example and is not a recommendation to pursue a particular strategy. We or a connected person may have positions in or options on the securities mentioned herein or may buy, sell or offer to make a purchase or sale of such securities from time to time. In addition we reserve the right to act as principal or agent with regard to the sale or purchase of any security mentioned in this document. For further information, please refer to our conflicts policy which is available on request or can be accessed via our website at www.brewin.co.uk. Information contained in this document is believed to be reliable and accurate, but without further investigation cannot be warranted as to accuracy or completeness. Brewin Dolphin is authorised and regulated by the FCA (Financial Services Register reference number 124444)
PRESS INFORMATION
For further information, please contact:
Richard Janes richard.janes@brewin.co.uk / Tel: +44 (0) 20 3201 3343
Siân Robertson: Sian.Robertson@brewin.co.uk / Tel: (0) 20 3201 3026
Payal Nair payal.nair@brewin.co.uk / Tel: +44 (0) 20 3201 3342
NOTES TO EDITORS
About Brewin Dolphin
Brewin Dolphin is a UK FTSE 250 provider of discretionary wealth management. With £59.0* billion in total funds, we offer award-winning, personalised wealth management services that meet the varied needs of our clients including individuals, charities and corporates.
Our services range from bespoke, discretionary investment management to retirement planning and tax-efficient investing. Our focus on discretionary investment management has led to significant growth in client funds and we now manage £52.0* billion on a discretionary basis.
Our intermediary business manages £19.0* billion of assets for over 1,700 advice firms either on a discretionary basis or via our Managed Portfolio Service, the MI Brewin Dolphin Voyager fund range and Sustainable MPS.
In line with the premium we place on personal relationships, we’ve built a network of 33 offices across the UK, Jersey and Republic of Ireland, staffed by qualified investment managers and financial planners. We are committed to the most exacting standards of client service, with long-term thinking and absolute focus on our clients’ needs at the core.
For more information, visit: www.brewin.co.uk
*as at 31st December 2021.