Holly Black: Welcome to the Morningstar Series “3 stock picks”. I'm Holly Black with me, is Storm Uru, he's manager of the Liontrust Global Dividend Fund. Hello.
Storm Uru: Hi, Holly.
Black: So, you've got three stocks for us today. Despite all the recent turmoil and dividend cuts, you’re still feeling pretty positive on where would you like to start?
Uru: Well, we think there's a number of very, very attractive companies trading at very attractive prices around the world. And fortunately, they're still in a great strong position to continue paying dividends and fingers crossed that they're also able to increase their dividends over the next three to five years. And so, we start first with Apple. It's in a fantastic competitive position. It's a company which has executed so well in the last 10 years. It's got a strong balance sheet. So, it's got net cash position on its balance sheet of over $100 billion. So well positioned to weather the transitory weakness as we go through an unknown economic time.
Black: And there were initially at the start of this crisis some worries about its supply chain, a lot of which is in China and Asia, that seems to have abated. And now presumably, because we've all been stuck staring at a screen for six or seven weeks, their products have just become more important.
Uru: Yeah, you’re dead right. And the thing is, is that, every three to four years, we're going to be going be refreshing our iPhones. But the thing that's really important with Apple is that it's transitioning its business model way from the handsets, away from hardware to a software type business. So, every time you purchase something on their application store, they take a little bit of money from that. And also, they're transitioning to a wider product variety with its wearables sort of product line. So AirPods have been a revolution in terms of listening to music on the go, communicating with people. And communication between people across geographies is still so important. So, we think that Apple with its product positioning, its relevance in everyday life plus a strong balance sheet, we remain very positive on its long-term prospects.
Black: Okay, what’s stock number two.
Uru: Stock number two, Visa. With this crisis has forced a lot of us to shift their spending habits to online this is benefit to Visa. But what really is the underlying growth driver of this company is transitioning from a cash-based economy to a cashless based economy. And we're currently from a global perspective, only around 10% to 15% of the way through that so we’ve got a long runway for Visa. Doesn't have any real competitive threats and operates in a duopoly so very strong competitive position. And it's been growing its dividend now at over 20% over the last five years. So, we think it’s a fantastic income stock to continue to drive income growth to us as shareholders, we have no concern over cutting its dividend. In fact, we expect it to grow its dividend this year and emerge from this crisis in a very, very strong financial position, ready to take on the new world.
Black: And that cashless trend has just been accelerated by the recent crisis because people don't want to handle physical money. So, what is our final stock?
Uru: It's a company called Equinix, which is a data room provider for many of the big networks around the world. So, if you think about a data room, what you really need to understand is Equinix provides the backbone to the internet infrastructure. So, the more people that plug onto the internet and the more databases that plug into the internet, the more traffic that it drives through its business. So, think about – I think of Equinix like a toll bridge. At the moment, you have about 100 cars going across the toll bridge every day. And if that increases to 500 cars, there's no marginal cost to the actual toll bridge, but the revenue that you take drop stretch and bottom line. Now Equinix has a rate. So, what that means is that as the profitability of the company grows, that comes straight back to us as shareholders in the forms of a dividend. So, as more traffic migrates to digital cloud, to companies executing digital transformation of businesses, and some of the laggards in the industries across all sectors, transitioning to a digital workplace, we anticipate Equinix to really benefit from the switch.
Black: Storm thank you so much for your time. For Morningstar I'm Holly Black.
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