CybiWealth | Investment Portfolio

CybiWealth Investment Portfolio

The below pie chart indicates the companies that are currently included in the CybiWealth Investment Portfolio.

Below is a summary of each company, and an outline as to why we feel they are good investments, and ones that we would want to invest in for 10 years or beyond.

3M

3M is one of the biggest and best industrial companies in the world. The company was founded in 1902 and has grown through innovation sustained for over a century. Today, more than 60 000 3M products are used in homes, businesses, schools, hospitals and other industries around the globe. These products range from adhesives and abrasives to personal protective equipment and medical devices.

3M’s success is largely attributable to the company’s ability to apply innovative technologies to an endless array of real-world customer needs.

One third of 3M’s sales come from products invented within the past five years, thanks to innovations from the thousands of researchers and scientists the company employs around the world.

The company helped pioneer magnetic audio and video tape and created the synthetic fabric used in the soles of Neil Armstrong’s boots when he became the first man on the moon.

3M is now best known for Scotch brand adhesive tape, Scotchgard stain protection for fabrics, Thinsulate insulating fabric, and the Post-it note.

Unlike many of its industrial peers that earn most of their revenue through equipment sales, 3M has a high percentage of recurring revenue stream from consumables. In fact, recurring revenue streams make up approximately 50% of the company’s sales. This is advantageous in an economic recession as other industrial peers may suffer from large declines in revenue whereas 3M’s sales impact will likely be limited.

3M has paid dividends without interruption for over 100 years.

Honeywell

With its roots dating back to 1885, Honeywell is a globally diversified industrial technology company that produces a number of commercial and consumer products including aircraft engines, building heating and ventilation systems, as well as warehouse and supply chain automation technologies.

Its aerospace products are found virtually on every aircraft platform in the world, its turbochargers in more than 100 million vehicles worldwide and its home and building products, software and technologies are found in more than 150 million homes and 10 million buildings across the globe.

Honeywell is well positioned to benefit from two important longer term trends – developing market consumerism and the Industrial Internet. With GDP growth of major developing markets being increasingly driven by household spending as they transition from investment-led to consumption-driven economies, Honeywell will stand to benefit as approximately a quarter of their revenue is derived from these markets. Honeywell is also considered one of the world leaders in the Industrial Internet space developing both connected products as well as software. One example is its airplane avionics systems that can detect and diagnose potential problems mid-flight, alert ground engineers of a fault and provide potential solutions. Upon landing, the fault can be quickly resolved allowing airlines to reduce downtime and keep passengers safe.

United Technologies

UTC serves customers in the commercial aerospace, defense and building industries and ranks among the world’s most respected and innovative companies.

United Technologies invented the modern elevator and is currently the world’s leading installer and maintainer of elevators, escalators and moving walkways. Each day the company transports an estimated 2 billion people through a world of ever-taller buildings, busy metros and well-travelled airports.

Today, nearly all aircrafts rely on systems and components from the company’s Aerospace Systems. United Technologies is one of the world’s largest suppliers of advanced aerospace and defense products for business, military and international customers.

The company also has the largest and most comprehensive aftermarket business in our industry which provides a substantial source of annuity income.

A global leader in aircraft propulsion, United Technologies’ large commercial engines power more than 25 percent of the world’s mainline passenger fleet.

United Technologies bought the airplane parts maker Rockwell Collins in September 2017 for $23 billion, making it the biggest aerospace deal in history.

Coca-Cola

Coca-Cola is the largest seller of non-alcoholic beverages in the world with an offering that includes fizzy drinks, bottled water, energy drinks, fruit juices and ready-to-drink teas and coffees. People in more than 180 countries drink almost 2 billion servings of a Coca-Cola product every day.

Coca-Cola’s success comes from the strength of its brands – the red and white Coca-Cola logo is recognized by 94% of the world’s population.

The company owns over 500 beverage brands and manufactures over 4100 products. As such, if you wanted to try a different Coca-Cola product everyday, it would take you 11 years to sample them all.

It is estimated that by 2020 the global middle class will grow by 700 million people, driving an increase in personal consumption by approximately $20 trillion. Consequently, Coca-Cola has calculated that the worldwide beverage industry (excluding the US) will increase in value by approximately $300 billion over the same period.

In addition to benefitting from a growing market, Coca-Cola is also determined to become an even bigger part of our day-to-day lives. The company points out that the average household (worldwide) consumes 26 drinks per day and that of these drinks only 1.4 are made by Coca-Cola. Thus, despite being a massive company which has been operating for over 70 years, the potential for dividend and capital growth in the years ahead remains robust.

Coca-Cola’s geographic diversification, diverse product offering and dominant brands has allowed the company to increase its dividends on more than 50 consecutive occasions in the face of several recessions, oil shocks, wars and market crashes.

Diageo

Diageo is one of the leading premium alcoholic drinks businesses in the world. It produces, distils and markets alcoholic beverages. The company offers a wide range of branded beverages, including vodkas, whiskeys, tequilas, gins and beer.

Five of Diageo’s strategic brands – Johnnie Walker, Captain Morgan, Jose Cuervo, Smirnoff and Guinness – are number one in their categories.

Although 40% of Diageo’s operating profits come from North America, one of its strategic objectives is continuing its expansion into emerging markets as projected economic growth in emerging markets is generally higher than developed markets. An example of a recent acquisition is the Brazilian company Ypioca which manufactures cachaça, one of the most popular distilled alcoholic beverages in Brazil.
Diageo increased its presence in the faster growing markets of the world, through both acquisitions and organic growth.

Nestlé

Established over 150 years ago, Nestlé is the world’s largest food and beverage company. The company operates in 189 markets across the world and last year, generated approximately 90 billion Swiss Francs in sales.

Nestlé’s products include baby food, medical food, bottled water, breakfast cereals, coffee and tea, confectionary, dairy products, ice cream, frozen food, pet foods and snacks.

Twenty-nine of Nestlé’s brands have annual sales of over 1 billion Swiss France (about US$1.1 billion) including Nespresso, Nescafé, Kit Kat, Smarties, Nesquik, Stouffer’s, Vittel and Maggi.

Nestlé’s success can be attributed to the nature of its brands, which allows the company to form part of the day-to-day lives of people around the world. For example, consumers around the world drink on average 5 500 cups of Nescafé every second of every day, 5.2 billion packets of Maggi Noodles are sold every year and 650 Kit Kat fingers are consumed every second of the day.

In total Nestlé owns over 2 000 brands and 10 000 products, and sells over 1 billion products daily. This diversified portfolio of well-loved and trusted consumer brands has enabled the company to generate an exceptional track record of reliable growing dividends and robust returns going back to 1959.

Anheuser-Busch InBev

Anheuser-Busch InBev is a global beverage and brewing company headquartered in Belgium with offices around the globe. It is the world’s largest brewer and is considered one of the top five consumer product companies in the world.

Anheuser-Bush InBev owns over 500 beer brands which are sold in more than 150 countries. AB InBev owns 7 of the top 10 global beer brands. Flagship brands such as Budweiser, Bud Light and Michelob Ultra form part of the beer brand suite of AB InBev.

AB InBev dominates the beverage and brewing market, controlling about a third of global volumes and nearly half of global profits.

Pfizer

Pfizer is a global pharmaceutical company headquartered in New York City, United States. The business engages in the discovery, development and manufacture of healthcare products. Its global portfolio includes medicines and vaccines, as well as many of the best known consumer healthcare products.

With annual sales over $50 billion in 2017, Pfizer is one of the world’s largest pharmaceutical firms.

The company’s products are sold in over 125 countries which are manufactured across 58 manufacturing sites worldwide.

In 2017, the company invested $7.7bllion into researching and developing new treatments and novel approaches to treat and prevent disease. This amount represents 15% of its total revenue.

Since 2011, Pfizer has secured 30 product approvals – including five products approved with blockbuster potential.

People born in the baby boomer generation – those born post World War II until the early 1960s – are reaching retirement age.

According to research carried out by McKinsey, the number of people over the age of 60 will increase by one third in the developed world by 2030. They also expect healthcare spending to increase by $1.4 trillion.

With its broad and diverse portfolio of the globe’s essential medicines ranging from vaccines to cancer treatment, Pfizer is likely to be a major beneficiary of the aging populations in the first world.

Johnson & Johnson

Johnson & Johnson manufactures health care products and provides related services for the consumer, pharmaceutical and medical devices and diagnostics markets. The company sells products such as skin and hair care products, acetaminophen products, pharmaceuticals, diagnostic equipment and surgical equipment in countries located around the world.

Johnson & Johnson (J&J) is the biggest healthcare company in the world with a market cap of $315 billion.

J&J Pharmaceutical segment is focused on high-priority disease areas that address major unmet needs.

J&J has an industry-leading pipeline of truly differentiated products.

40 potential line extensions (production of a new version of an old drug) on the company’s best patented drugs.

Another 10 new drugs from between now to 2019, each with a potential $1billion in annual sales.

From 2020 onwards, there are another 25 potential new drugs which has the potential to drive growth further into the future.

People born in the baby boomer generation – those born post World War II until the early 1960s – are reaching retirement age.

According to research done by Mckinsey, the number of people over the age of 60 will increase by one third in the developed world by 2030. They also expect healthcare spending to increase by $1.4 trillion.
With its broad and diverse portfolio of the globe’s essential medicines ranging from vaccines to cancer treatment, Johnson & Johnson like Pfizer, is likely to be a major beneficiary of the aging populations in the first world.

Sanofi

Sanofi, headquartered in Gentily, France, is a global pharmaceutical company. They develop and manufacture healthcare products across seven major areas: cardiovascular, central nervous system, diabetes, internal medicine, oncology, thrombosis and vaccines.

With annual sales over $21 billion, Sanofi is one of the world’s leading pharmaceutical firms. They have a presence in more than 100 countries, with 79 manufacturing sites in 36 countries, providing healthcare solutions in more than 170 countries around the world. 70% of their revenue comes from first world countries and 30% from emerging markets.

According to research carried out by McKinsey, the number of people over the age of 60 will increase by one third in the developed world by 2030. They also expect healthcare spending to increase by $1.4 trillion.
With its broad and diverse portfolio of the globe’s essential medicines ranging from vaccines to cancer treatment, Sanofi like Pfizer and Johnson & Johnson, is likely to be a major beneficiary of the aging populations in the first world.

GlaxoSmithKline

GlaxoSmithKline is a British pharmaceutical company that develops, manufactures and markets vaccines, medicines and health-related consumer products. Its brands include Sensodyne, Aquafresh, Horlicks, Eno and Voltaren.

With annual sales over $21.5 billion, Sanofi is one of the world’s leading pharmaceutical firms.

80% of revenue earnings come from First World countries and 20% from emerging markets.

In 2017, the company invested £3.9bllion into researching and developing new treatments and novel approaches to treat and prevent disease.
13% Consumer Healthcare sales in 2017 came from product innovations launched over the past three years.

People born in the baby boomer generation – those born post World War II until the early 1960s – are reaching retirement age.

According to research done by Mckinsey, the number of people over the age of 60 will increase by one third in the developed world by 2030. They also expect healthcare spending to increase by $1.4 trillion.

With its broad and diverse portfolio of the globe’s essential medicines ranging from vaccines to cancer treatment GlaxoSmithKline, Pfizer, Sanofi and Johnson & Johnson is likely to be a major beneficiary of the aging populations in the first world.

Medtronic

Medtronic is a global medical device company committed to improving the lives of people through medical technologies, services, and solutions. It operates in over 160 countries across the globe and is considered the world’s largest medical technology company with 80 manufacturing facilities as well as employing over 7 500 scientists and engineers.

It develops and manufactures a large portfolio of medical devices, such as drug delivery systems, various surgical products and patient monitoring systems as well as therapies to treat a number of chronic conditions including cardiovascular therapies, spinal therapies, Parkinson’s disease and diabetes.

The company is embracing technology by developing smart medical products that link to smartphone apps and watches allowing patients to better manage their chronic conditions such as Diabetes.

L’Oréal

L’Oréal is a French cosmetics company that manufactures, markets and distributes products across the world. Its brands include L’Oréal Paris, Maybelline New York, Garnier, The Body Shop, Matrix and Redken.

L’Oréal is the biggest cosmetics company in the world. The company’s brands cover all cosmetic lines and typically command leading market positions.

With a presence in more than 130 countries, L’Oréal is reaching out to more people across a bigger range of incomes and cultures than just about any other beauty product company in the world.

The company’s consistent performance has enabled it to generate an exceptional track record of reliable dividends going back to 1988.

Looking ahead, a diverse portfolio of powerful brands combined with a global footprint provides L’Oréal with an ideal platform to benefit from the anticipated consumption boom. The company is very optimistic about its future, expecting to add 1billion new customers over the next 10 years.

Most of these customers are likely to come from emerging regions like Asia (including India) and Latin America. In addition, the powerful upsurge in digital communications, selfies and social networks is anticipated to continue driving the demand for make-up as it has prompted people to be more visible with a desire to show themselves in their best light. More women entering the workforce and rapid urbanization are other major global trends that are very positive for the beauty industry.

While the growth outlook for the company is very favourable, risks are also low. According to L’Oréal’s research, women elect to give up many other purchases before they sacrifice products in their beauty regime. The price of make-up is also relatively low when compared to other big-ticket items like overseas holidays, cars or furniture, which people normally cut back on in hard times. In addition, the diversity of L’Oréal products, which cater for all income bands, reduces the risk of losing customers trading down to save money.

In summary, an unrivaled portfolio of beauty products combined with a global footprint provides L’Oréal with an ideal platform for inflation-beating dividend and capital growth in the years ahead.

Colgate-Palmolive

Colgate-Palmolive is an American multinational company which manufactures oral, personal, household, fabric, and pet nutrition products. The company operates in over 75 countries and sells products in over 190 countries and territories.

Related: Why should I consider investing in multinational equities?

Colgate-Palmolive is a giant in the household staples industry, providing basic necessities that consumers use on a day-to-day basis all around the world with a product portfolio including popular brands such as Sta-Soft softeners, Sanex deodorants, Protex soaps, Palmolive shampoos and Colgate toothpastes.

The company’s exposure to emerging markets (approximately half of Colgate-Palmolives revenue) provides a robust platform for inflation beating dividend and capital growth in the years ahead. For instance, the Colgate toothpaste brand is highly sought after in both India and China, being recently rated the number 1 one consumer brand and the number 3 three international brand in these markets respectively.

Colgate-Palmolive is undoubtedly a world leader when it comes to providing household necessities which enables the company to produce reliable dividends.

P&G

Procter & Gamble manufactures and markets consumer products in countries throughout the world. The company provides products in the laundry and cleaning, paper, beauty care, food and beverage and health care segments. Procter & Gamble’s products are sold primarily through mass merchandisers, grocery stores, membership club stores, drug stores and neighbourhood stores.

P&G is one of the world’s largest consumer products companies focusing on 65 brands across 10 product categories and has been in business for 179 years.

21 of its brands have annual sales of $1 billion to about $10 billion.

Has paid a dividend for the last 126 years, increased for 60 consecutive years.

35% of sales come from developing markets.

Has been growing steadily, up from 21% in 2004.

P&G has 26 innovation centres across the globe to tailor their product offerings for consumers in specific markets.

China is P&G’s second largest market and is the largest fast moving consumer goods (FMCG) company in China in terms of households reached 153 million.

Spends roughly $2 billion a year on Research and Development, roughly 60% more than its nearest competitor.

Each year it invests at least another $400 million in foundational consumer research to discover opportunities for innovation, conducting some 20 000 studies involving more than 5 million consumers in nearly 100 countries.

Reckitt Benckiser

Reckitt Benckiser is the number one Health, Hygiene and Home Care Company in the world with sales in over 180 countries. Some of the company’s most well-known brands include the antiseptic brand Dettol, the sore throat medicine Strepsils, the hair removal brand Veet, the immune support supplement Airborne, the indigestion remedy Gaviscon, the baby food brand Mead Johnson; and, the air freshener Air Wick.

Strong brands, continuous innovation and products which fulfil basic human needs underpin Reckitt Benckiser’s growth. The company’s strategy is to have a highly focused portfolio concentrating on its 19 most profitable brands, which are responsible for 70% of net revenues. Emphasis is placed on rapidly growing categories that are underpenetrated and offer superior margin potential.

The company earns its revenue from a broad spread of the global economy and consequently is not dependent on the fortunes of one particular country.

A major reason for Reckitt Benckiser’s success outside its home economy (UK) is its 35 research and development centres which are spread across the globe. These centres focus on innovation as well as tailoring products for specific markets. This has helped the company gain a strong foothold in faster growing developing markets which contribute 30% to Reckitt Benckiser’s revenue.

Even in unpredictable times, consumers around the world will continue to clean their homes, wash their dishes and need medication for sore throats and headaches. Thus the demand for Reckitt Benckiser’s products is likely to steadily grow regardless of external factors.

Unilever

Unilever is a leading transnational consumer goods company, owning over 400 brands and has a massive footprint in about 190 countries. Its product range includes food and beverages, cleaning agents and personal care products.

Unilever’s products are largely consumer necessities and are used by about 2.5 billion customers around the world daily. In addition, it has strong brand dominance in this market. This allows Unilever to consistently deliver sustainable and growing future dividends, in both changing and tough times.

The customer loyalty created by Unilever’s brands keeps competitors at bay and ensures a consistent demand for the company’s products. Lipton, for example, is the world’s best-selling tea brand. Lux is the world’s most popular soap.

Driven by economic growth in emerging markets, almost a quarter of a million people join the middle class every day. About 57% of Unilever’s revenue comes from these markets and this is favourable for dividend growth. Unilever’s Lux and Lifebuoy brands, for example, are listed in the top 10 consumer brands in India, one of the fastest growing economies in the world.

Well-diversified companies provide more predictable dividend and capital growth as their success is not tied to the fortunes of one particular economy or dependent on the success of one particular product. Unilever has great diversification – given its worldwide footprint and product range.

Allianz

The Allianz Group is a global financial services provider with services predominantly in insurance and asset management. The Allianz group serves 88 million customers in more than 70 countries around the world. In 2017 it had over 125 billion Euro’s in revenues and an operating profit of approximately 11 billion Euros.

Allianz have a proven track record of paying dividends since the 1980’s and a key theme with all its service is that it is a global leader in every offering it has.

Its insurance business covers all business lines, designed to protect its clients against any risks. Allianz is one of the top 5 leading insurer in both property and casualty and life and health.