Holly Black: Welcome to Morningstar’s 3 Stock Picks. I’m Holly Black. With me is Robin Geffen. He is manager of the Liontrust Income Fund. Hello.
Robin Geffen: Holly, good morning. How are you?
Black: So, Robin, three stocks for us today. I suspect that we’re going to have a theme of sustainable dividend paying. Where would you like to start?
Geffen: Right. So, Segro is incredibly well-positioned to cope with the new world we find ourselves in. So, they are predominantly a business that has been investing in large out of town distribution centers and in-town warehouses. So, their tenants are typically people like Amazon, the supermarket chains. And they’re providing a key service. There’s a real shortage of these sort of out of town big boxes, and they’ve been incrementally investing in them very effectively over a number of years now. And what’s happened this year that has really cemented it is that if you look at people like British Land and Land Securities, the other two FTSE 100 property stocks, they have experienced this year incredibly low rent collection from their tenants, whether it’s in shopping malls or whether it’s in office space and sort of 32%, 33% quarterly collections is probably about where those companies are. But Segro is collecting 92%, 93% of their quarterly rents with no problem at all and anybody that doesn’t pay for warehouse storage inside town or their big box distribution centre outside towns, anybody of the tenants that don’t pay, they are out because there’s a queue of people wanting to go in. So, it’s very much part of this technology revolution revolutionizing how we shop, how we get things delivered, how we pay for it. And I think that’s incredibly important.
Black: Okay. And what is stock number two?
Geffen: Stock number two is Visa. Visa is a company that I’ve owned for a long time. It has a fantastic dividend growth perspective, growing – grew last year, 20%, 15% compound over a number of years now. It’s an incredibly well-run company. But what we’ve seen this year over just a few weeks, say, 5 weeks, was a sort of explosion five years progress of moving away from cash and towards pay on credit card.
Black: Particularly true this year where there’s been this cash is dirty almost theme playing out.
Geffen: And that’s been a phenomenon. Also, they’ve got a tremendous B2B business where they enable companies to draw down payments very quickly. So, they’ve got a number of levers for growth. It is an extraordinary business and it permeates our everyday lives. When we wake up in the morning, as you say, with Covid, we know wherever we go that cash is no longer welcome and we have to pay with a credit card and that really permeates our lives. And even their competitors like young upstarts that are joining their payment connections, they are still having to use Visa or MasterCard’s rails.
Black: Okay. And what is our final stock today?
Geffen: Our final stock is again, I think, a very appropriate one for these times. Our final stock today is AstraZeneca. Extraordinarily, AstraZeneca is now the largest company in the UK and at the beginning of the year it wasn’t actually in the top five. So, it’s the largest FTSE 100 company, around about 7% of the market. And again, this is a very important stock for a number of reasons, but it’s been a real self-help story. Over the last two or three years, they’ve really focused the business down on to core areas like oncology and this has returned them to the high growth path. It’s a tremendous example of a very large company turning itself around through excellent management, forward planning, and the drugs they’re producing, not just the Covid-19, but the drugs they’re producing are going to play an incredibly important part in our health going forward.
Black: Robin, thank you so much for your time. For Morningstar, I’m Holly Black.