Each week, a professional investor tells us where he’d put his money. This week: Stéphane Soussan of CPR Asset Management’s Invest Food for Generations.
The United Nations forecasts that the world’s population will reach a staggering 9.7 billion by 2050, up from around 8.5 billion in 2030 and 7.3 billion today. A rapidly growing global population is one megatrend investors can profit from; two related ones are urbanisation and increasing demand for resources. Investors can capitalise on structural change of this kind while also contributing to the vital task of providing enough food and water for everyone on the planet.
Investing in innovative new products and technologies across the food value chain will help transform industries such as agriculture, water and food retail so that they can sustainably produce more food with fewer resources. Including companies that can contribute to the transformation of the food value chain in your portfolio could boost your long-term returns significantly.
Sustainable and renewable
One company that has invested heavily in sustainable and renewable products is DSM (Amsterdam: DSM), a multinational focused on nutrition, health and sustainable living. A world leader in the production of vitamins, DSM is at the core of the health and wellness trend. The group has been investing in innovative nutritional products including the production of omega-three nutrients made from algae. Margins are expected to increase thanks to a dynamic new product mix and the company is well positioned to see its earnings-per-share achieve double-digit growth.
Investing in the theme of food does not mean opting only for agricultural and restaurant stocks. Reflecting CPR Asset Management’s multi-sector approach, our second stock offering exposure to the food theme is Canadian Pacific Railway (NYSE: CP/Toronto: CP), one of two railways in Canada. Canada’s agricultural sector has been growing rapidly, and with 35% of the railway’s business linked to grains, forest products and fertilisers, CP has capitalised on Canada’s expanding agriculture and forestry industries.
Proven pricing power
With only one competitor, pricing power has proved strong over the last few years. The company’s cost-cutting and efficiency measures should drive margin improvement, which, combined with material revenue growth, means CP offers a compelling investment case. Finally, we value stocks that can capitalise on developing trends across different geographies.
Exposure to emerging markets
That brings us to Danone (Paris: BN), the leading global dairy products company. It has been diversifying its portfolio to include plant-based food and beverages in response to changing consumption patterns – notably the rise of veganism – and appetite for environmentally friendly products.
Danone also has significant exposure to emerging markets, which have seen an uptake in demand for animal protein, driven by rising income. China’s phasing out of its one-child policy over the past few years is also expected to have a positive long-term impact on the company’s infant-formula product range.