Insights from the latest InvestmentMarkets Webinar where Elisa Di Marco from Magellan discussed Building Resilient, High-Performing Portfolios
Consumer companies are often hailed as masters of driving consumption, but their success hinges on more than just effective marketing. It is the billions poured into research and development, analytics, and innovation that set quality consumer companies apart. Identifying which companies have the agility to thrive over decades is crucial for investors seeking long-term growth and stability.
During the most recent InvestmentMarkets webinar, Elisa Di Marco, Investment Director at Magellan, highlighted the importance of including quality defensive stocks in portfolios. According to Di Marco, “defensive growth companies play a crucial role. They complement higher growth and higher risk investments, allowing you to compound your wealth with a high degree of certainty and the potential to reduce downside risks over decades,” she said.
The idea resonated with the sophisticated investor audience on the webinar. Darren Connolly, Chief Marketing Officer at InvestmentMarkets, noted, “We have seen a swing in investor interest to more defensive opportunities on the platform in the last few months. Defensive growth companies with strong fundamentals could help investors navigate any increased volatility with greater confidence.”
Di Marco pointed out that the at-home consumer food and beverage industry has demonstrated incredibly steady growth over the last sixty years, typically around 5% per annum, and healthcare around 8% per annum. “This reliable growth is achieved at a lower-than-market risk level. The beta of consumer staple stocks is around 0.5, while healthcare stocks have a beta around 0.86, both lower than the market,” she said.
Investing in quality companies is critical to achieving these higher returns. Di Marco emphasised that resilient quality companies like Coca-Cola, Colgate, and Nestlé excel because of their significant investments in research and development, strong brands, and extensive distribution networks, which mean they often maintain the ability to reprice and can sustain market leadership even during economic shifts.
“Nestle is a great example of a company that invests behind premiumisation, enabling the brand to retain customers throughout economic cycles and the consumer lifecycle,” she noted.
Consumer companies that continuously reinvest in research and development are also better equipped to maintain their competitive advantage. Colgate, for example, has accelerated its research and development efforts over the last six years, leading to increased revenue growth and consistent returns above the consumer staples index.
L’Oreal has also demonstrated its resilience through continuous investment in marketing and brand development. As the largest beauty company in the world, L’Oreal’s strategy of innovation and consistent relevance has enabled it to achieve over 10% annual returns, making it a standout performer within the consumer staples space.
Ultimately, innovation is the lifeblood of these companies. Whether it is Nestle’s breadth of product, Colgate’s continuous product improvements, or L’Oreal’s relentless drive to remain relevant, high-quality consumer companies are built on strong foundations of research and development. This ongoing commitment to innovation is what makes them attractive long-term investment opportunities.
InvestmentMarkets provides invaluable resources for investors to begin their own journey to find fund managers with the capacity and capability to identify companies like these, that are crucial for long-term investment success.
Connolly stated “InvestmentMarkets empowers self-directed investors to search a wide range of opportunities, and find fund managers and funds, that best suit their own personal situation.”
“One way to stay abreast of the universe of possibilities is to subscribe to receive our newsletter, education material, and invites to regular events, and hear from presenters like Elisa,” he concluded.
Elisa Di Marco’s presentation ‘Don’t forget your toothbrush’ can be found here.