Coronavirus will end up giving value companies another bite at the cherryPublished on 21 May 2020
Investors will prize resilience over low costs in new environment
Resilience could be as important as sustainability in a post Covid world, according to Graham Wainer, Head of Investments.
“Being resilient will certainly trump being the lowest cost producer and may be as important to investors as a company’s sustainability credentials”, he told guests at Stonehage Fleming’s latest investment webinar, broadcast from London. “Investors will assign high importance to a company’s resilience in the way they currently do environmental social and governance (ESG) scores”, he said.
Investors, said Graham, will interpret resilience through various measures pertaining to - among other things - a company’s distribution chain or business model. “Investors will look at many things to determine resilience, such as whether a business is over-dependent on China, say, for its supply chains, or whether its product lines are well diversified or not.”
The decline in trade and investment between nations, Graham told guests, will undoubtedly have a hand in separating the wheat from the chaff in terms of companies’ resilience. And it is value companies, he believes, who will benefit. “Deglobalisation and onshoring are going to give a lot of value companies another bite at the cherry” said Graham. “These companies had been sold off and disregarded as real contenders in the market as cheaper suppliers from China and elsewhere gained market share.”
He cited the recent shortage of personal protective equipment (PPE) for NHS workers in the UK to illustrate his point. “Put yourself in the shoes of a health authority who has been sourcing their PPE from around the world”, said Graham. “There is a pretty strong chance that the business down the road which had previously struggled to survive due to that kind of low cost competition is going to be back in business. It will give an opportunity for value companies, competed virtually out of business, to get back in”.