In many ways, 2020 has been a year to forget – how many cancelled holidays, furloughed careers and ‘Zoom pub quizzes’ can you count? Thankfully, we are now into the fourth and final quarter of the year and to help investors keep feeling inspired about their portfolios, we have picked out three interesting ideas.
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Berry Global Group
The likes of Berry Global Group, a manufacturer of plastic packaging, may seem an unlikely place to start. And yes, over the years, consumers and investors alike have been increasingly willing to snub all things plastic due to the well-highlighted damage it can wreak on the environment through pollution (and our absentmindedness).
However, Berry Global Group has worked hard to adapt to the world changing around it. This has included entering an initiative to recycle 30 million pounds of plastic a year (in partnership with building material manufacturer AZEK) and launching a new 100% sugarcane-based bottle. Such initiatives have not gone unnoticed and in October one of Berry’s major facilities in France achieved the International Sustainability and Carbon Certificate, which accredits the company as meeting high environmental and social standards.
The good news for investors is, as well as being a forward-looking packaging manufacturer, Berry Global Group has become a strong financial performer, too. The company’s proactive management team have helped it weather a difficult summer, meaning it recorded a net sales increase of 50% in Q3 (when it took in $2.9bn). This kind of performance, paired with an environmentally conscious strategy, has won favour with investors and over six months the share price has climbed from $34.98 on 6 April to almost $50 by early October.
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Natural Gas
Staying with the environmental theme, fossil fuels have been particularly hard hit this year, as the supply-demand relationship was revealed to be precariously balanced. With oil producers refusing to cut their production (there are always geopolitical issues at play) as demand fell, the price per barrel quickly collapsed. Now, even the biggest oil giants are cancelling dividends and cutting thousands of jobs.
However, despite both coming from the same source, there is little correlation between oil and natural gas as tradable commodities. This is good news for investors who want to access a fuel that has started to attract more attention. Over the past few months, the price of natural gas has been rallying, suggesting the commodity is coming into greater demand as we head into winter. The price has risen from $1.520 per MMBtu on 25 June to $2.537 per MMBtu by early October as reduced reserves become more valuable and supply issues loom.
Flows from Russia (the biggest exporter of natural gas to Europe) are down 33% this year and with this winter forecast to be colder than that of 2019, this will increase demand for natural gas for heating homes. Encouragingly, investors are not the only ones noticing this trend, with US energy giant Chevron recently buying natural gas supplier Noble Energy for $4.1bn.
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IPOs
Initial public offerings are generally received positively by investors. Not only do they offer an opportunity to buy shares in newly available companies that are becoming big enough to go public, but an IPO reflects a strong level of market confidence by the company’s management. Unsurprisingly though, the IPO market has been suppressed this year as companies have shelved expansion plans and instead focused on survival. However, this is starting to change, and September saw the IPO market return with a bang.
With major stock markets being primarily dragged upwards by the tech sector, it is no surprise that these IPOs were all tech oriented. For example, when listing on 15 September, cloud provider Snowflake Inc set a record as the biggest US software IPO ever when it raked in $3.4bn after selling 28 million shares. Just a few days later, video games developer Unity Software Inc raised $1.3bn in its IPO after selling 25 million shares. While other IPOs did not bring billions, the listings of Jfrog Ltd, Sumo Logic Inc, Vitru Limited, Palantir Technologies and Asana Inc – which all took place in September – each received millions in investment when they went public.
However, while this flurry of IPOs may be exciting and encouraging as investors it is important to treat such opportunities on a case-by-case basis. Sometimes the hype of an IPO does not match the fundamentals of the underlying company, so this exciting opportunity needs to be balanced out with research and a level head.
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