The political backdrop of 2019 truly tested investors’ nerves and I think this is set to continue throughout 2020.
Despite an air of calm (along with a share price rally) descending on the markets post-election, I think this will be short-lived. The Conservative win halted the market uncertainty that had been weighing it down, but as the reality of a ‘Boris Brexit’ becomes ever more real, I think the fallout for British business will be clear.
Environmental, social and governance (ESG) and sustainability themes have been at the front of investors’ minds as increasing concerns around climate change moved up a gear or two in 2019. Raging Australian bushfires, Greta Thunberg meeting Sir David Attenborough and Mark Carney’s keynote speech warning big business to take responsibility before it’s too late, mean that we’ve ended the year with the climate emergency remaining headline news.
The pressure is on for capitalism to help prevent an almighty climate disaster and for companies to govern in a responsible way, creating opportunities, while improving lives and the environment.
Yet as investors, we shouldn’t forget that crisis brings opportunity. All of which causes me to consider some companies I think could go the distance in 2020 and prosper in a world more focused on ethical and sustainability issues.
FTSE 100 favourite
Unilever (LSE:ULVR) is a FTSE 100 consumer goods specialist with many household brands under its banner include Dove soap, Surf detergent and Knorr.
It’s considered a relatively safe stock to own, with its regular 3% dividend yield and plentiful supply of brands that consumers love to buy on repeat. It’s also a feel-good stock as it has championed alternatives to animal testing for over 30 years and in November it received the US Corporate Consciousness Award for industry-leading work to end animal testing.
It’s committed to sustainability and the environment too. It unveiled reusable packaging innovations a year ago. Last month it announced that it has partnered with speciality chemicals company Evonik to create an environmentally friendly cleaning ingredient, Rhamnolipid.
It has an £114bn market cap, price-to-earnings ratio of 17, earnings per share of £2.53 and its continued growth prospects look good too as it has considerable exposure to emerging markets such as Asia, Brazil and India.
A sweeter future
Associated British Foods (LSE:ABF) aims to provide safe, nutritious food and affordable clothing through its recognisable brands such as Twinings, Dorset Cereals, Ryvita, and Silver Spoon sugar along with its high street favourite retailer Primark.
The company has a £21bn market cap, trailing P/E of 23 and earnings per share are £1.11. Its dividend yield is 1.8%.
Despite (or perhaps because of) its Primark operation having been criticised from ethical and sustainable viewpoints in the past, in its 2019 responsibility report, it outlines its ethical business practices. It’s working to reduce its carbon footprint, use natural resources efficiently and promote biodiversity.
At its December AGM, it predicted another year of strong profit and margin growth in its grocery brands. Although its sugar division brought profits down in recent years when an oversupply problem caused prices to be suppressed, this seems to be taking a turn for the better and increasing demand is expected to increase prices in 2020.
I like both these companies as potential 2020 buys as they’re long-standing businesses with a catalogue of well-known brands and FTSE 100 status. I also think they’ll stand strong in post-Brexit Britain.
