Holly Black: Welcome to the Morningstar series Three Stock Picks. I'm Holly Black, with me is Rachel Winter. She's Investment Director at Killik & Co.
Hello.
Rachel Winter: Hi, good morning.
Black: So we've just had International Women's Day. So what better time to look at a few companies with good female representation.
Winter: Yeah, absolutely. We've got some really great companies now that are managed by female chief executives. So a great time to really celebrate those women. So the first company we're looking at is Accenture, managed by a lady called Julie Sweet. She's been at Accenture for 10 years. She only became the chief executive in 2019, but she's got a really good track record. And she's been recognised by Fortune magazine and by the New York Times as being one of the most powerful women in corporate America. So really, really impressive lady.
And the reason we like Accenture, it's a consultancy business with a real expertise in technology. And being that we're in the middle of a big technological disruption, it's just a really good opportunity for Accenture. So, at the moment, you've got loads of other businesses, i.e., Accenture's clients, who were looking to use technology or automation to improve their processes and drives some efficiency gains. And then you've got other companies who are looking to set up new digital revenue streams and actually make more money that way. So lots of opportunities here for Accenture.
Black: So do you think there is a difference in the way a female and a male CEO run a company?
Winter: I think it's good to have a real mix. So I think, according to things that I've read, I think in the past, when you've had very male-dominated companies, you haven't had much diversity of thinking. So, I think having a female chief executive means you will get more differences in thought within the company. And therefore I think you'll get more innovation, and people are more likely to challenge each other. So, perhaps you'd get problems being spotted earlier.
Black: Okay. Okay, what's stock number two?
Winter: Second one is American Water Works. So this is managed by a lady called Susan Story. She has been there since 2014 and she's actually retiring next month, but over the time that she's been there, the company really has done incredibly well. So American Water Works, it is the largest listed water utility in the U.S., so they own a huge network of pipes, filters and wastewater treatments. That's what's called their regulated asset base. And the regulations say that they are allowed to earn a return of 9.5% per year on the value of that asset base. So, that's really quite a decent return for a utility company. And what we're saying is that American Water Works has been expanding the value of that asset base by acquisitions and overall efficiency gains. So, that return is growing every year and the share price has had a really, really successful decade.
Black: Okay. And our final stock?
Winter: Final one is L'Oreal. It doesn't have a female chief executive, but it does have the best gender pay gap in the industry. Now health and beauty it's had a really successful decades, driven by YouTube tutorials for makeup, Instagram, celebrity influencers, so the share price has done really incredibly well. We like L'Oreal because it's a very diverse business. It's involved in skincare, haircare, makeup, and it's involved in both luxury and high street products. And that really makes it quite recession proof. So, people tend to switch between the two, as the economy goes up and down. So, no matter what the economy is doing, I think people are still buying some kind of product from L'Oreal.
Black: And you say it's got a good gender pay gap. I mean, it's a company whose products are primarily for women. So you would hope that they were well-represented in the business?
Winter: You would hope so. So, I think that's more gender pay gap shows they've got a huge amount of women in senior management positions, which is great. Yes, historically, I think probably their products have appealed more to women. But at the moment, one of their fastest growing areas is products for men. And I think that is going to become a more important part of the business that perhaps that will attract more male talent as well.
Black: Why is it you think women are so underrepresented on boards and in CEO positions?
Winter: Very difficult to say. I think probably a number of different reasons. Part of it has got to be different maternity policies, so perhaps if you do leave to have children, it's then very difficult to get back into the game and get to a senior management position. I suppose also, after you have children, you've got less time to commit to such a senior role, but I think companies are starting to recognize that. And they are starting to put more policies in place to retain more women and it's looking to have a very good effect so far.
Black: And they're having to report it more as well, so they do have to report the diversity at the board level and gender pay gap now, so that can only be a good thing surely?
Winter: Absolutely. So yes, in the U.K., I think the gender pay gap reporting became compulsory in 2017. And that's really bought some attention to the issue. And since then, we have seen an improvement. It's quite a small improvement but we have seen an improvement in the U.K.'s gender pay gap statistics. And we've also seen a lot of investors wanting to invest on the basis of gender equality. So, there are lots of funds now that do pick companies based on how many women they have at senior levels, and how much they pay those women. So, I think it's becoming an increasingly important issue.
Black: Super. Well, thank you so much for your time.
Winter: You're welcome.
Black: And thanks for joining us.
