A: We think it is too soon to say if observable changes in consumers will be permanent. However, we believe the pandemic has greatly hastened the shift to online sales and may be redefining many leisure activities, even for something as small as the move to home-consumed cocktails in the US. We would mention adidas as one company that has led the way in utilising digitalisation to improve its business operations and sales, shifting from bricks and mortar retail partners to investing in its own website and apps to build a bigger moat between it and its competitors.
More generally we do think it likely that the pandemic will accelerate some long term secular growth trends. For example the growth of online banking has had a clear boost from people working from home, governments are bringing forward investments into the green economy as a way of stimulating activity, and leading companies are likely to accelerate plans to digitalise and automate business processes.
We look for exposures to a wide range of structural growth trends. Demographics may mean more older people in mature western economies underpinning the demand for healthcare, but it also means a greater proportion of younger people in emerging market economies enjoying higher standards of living. Such trends underpin the long-term demand for cosmetics, branded global spirits and luxury goods. L’Oreal, Pernod Ricard and LVMH are three well known European growth companies benefitting from these trends. The increasing use of digitalisation is also allowing companies such as Edenred and Experian to grow their own ‘capital lite’ networks to dominate niches in employee corporate benefits and credit services. While demand for greater building energy efficiency drives increased usage of Kingspan’s insulation materials.
Our investment approach leads us to invest in market leading businesses, whose products and services are valued far beyond European markets. We therefore tend to be materially overweight companies with global revenue exposures and are thus less dependent upon European economic activity.