Thanks
to
booming
artificial
intelligence
companies
(AI),
equity
markets
across
the
world
have
been
rallying
throughout
the
past
year.
But
with
concerns
that
the
record
highs
are
concentrated
in
only
a
handful
of
stocks,
having
a
diversified
portfolio
that
can
remain
resilient
in
a
variety
of
situations
is
still
a
priority.
In
this
article,
we
highlight
five
funds
with
a
high
allocation
to
the
consumer
defensive
sector:
that means
companies
that
manufacture
food,
beverages,
household
and
personal
products,
packaging,
or
tobacco –
things
people
want
to
buy
regardless
of
the
investing
weather.
It
also
includes
education
and
training
services
companies.
As
Morningstar’s
manager
research
analyst
David
Carey
explained
in
a
recent
US
version
of
this
article,
these
stocks
may
not
be
as
exciting
as
some
high-growth
technology
companies,
but
“consumer
defensive
companies
tend
to
have
stable
cash
flows
that
can
act
as
a
ballast
when
investors’
optimism
wanes
and
the
economy
slows.”
These
are
often
not
the
stocks
that
investor
associate
with
excessive
returns.
Indeed,
Carey
says
consumer
defensive
stocks
can
often
get
left
behind
when
optimism
is
high.
For
example,
in
the
US,
the
Morningstar
US
Market
Index
grew
49.8%
from
October
2022
through
May
2024,
while
the
Morningstar
US
Consumer
Defensive
Index
only
grew
24.7%.
Why
Should
I Consider
Consumer
Defensive
Stocks?
While
this
article
focuses
on
the
consumer
defensive
sector,
healthcare
and
utilities
are
sectors
with
defensive
qualities.
In
general,
the
stocks
in
these
industries
have
betas
of
less
than
1.
We
have
picked
out
the
five
Morningstar
Medalist-Rated
funds
with
the
highest
allocation
to
consumer
defensive
stocks.
Each
could
enjoy
a
reversal
when
such
stocks
are
back
in
favour.
Five
Consumer
Defensive
Funds
Barings
Global
Agriculture
•
Morningstar
Medalist
Rating:
Silver
•
Morningstar
Category:
Sector
Equity
Agriculture
•
Consumer
Defensive
Exposure:
41.55%
Barings
Global
Agriculture,
managed
by
Clive
Burstow,
James
Govan
and
Piers
Aldred,
invests
in
equity
and
equity
related
securities
in
the
agricultural
sector.
The
fund’s
exposure
to
consumer
defensive
stocks
is
41.55% –
slightly
higher
than
its
category
at
40.85%.
Overall,
the
fund
holds
30
equities
(and
four
other
holdings),
of
which
the
largest
stock
is
Corteva
(CTVA)
with
a
9.21%
portfolio
weight.
The
largest
consumer
defensive
stock
is
Lamb
Weston
(LW)
with
a
5.85%
allocation.
The
actively
managed
Barings
Global
Agriculture
fund
is
down
10.90%
over
the
past
year,
falling
further
than
the
average
fund
in
the
equity
agriculture
category,
which
fell
4.90%.
The
£87.9
million
fund
has
lost
5.72%
year
to
date,
while
the
average
fund
in
its
category
is
down
4.11%.
Over
the
past
five
years,
the
Barings
fund
has
climbed
4.04%,
compared
to
the
0.25%
gain
for
the
category.
Trojan
Global
Income
•
Morningstar
Medalist
Rating:
Silver
•
Morningstar
Category:
Global
Equity
Income
•
Consumer
Defensive
Exposure:
35.91%
James
Harries
and
Tomasz
Boniek
run
Trojan
Global
Income,
which
invests
globally
to
achieve
income
with
the
potential
for
capital
growth
in
the
medium
term.
The
fund’s
exposure
to
consumer
defensive
is
35.91%
–
significantly
higher
than
its
category,
which
on
average
allocates
11.75%
to
the
sector.
The
largest
stock
among
the
32
equities
is
the
consumer
defensive
giant
Unilever
(ULVR)
and
it
takes
up
5.29%
of
the
portfolio.
The
£643.2
million
Trojan
Global
Income
rose
4.80%
over
the
past
year.
The
gain
on
the
actively
managed
fund
was
shy
of
the
13.96%
gain
on
the
average
fund
in
the
global
equity
income
category.
Year
to
date,
the
Troy
Asset
Management
fund
is
up
0.04%,
while
the
average
fund
in
its
category
is
up
6.26%.
Over
the
past
five
years,
the
fund
has
climbed
4.05%,
compared
to
the
7.07%
gain
for
the
category.
WS
Lindsell
Train
UK
Equity
•
Morningstar
Medalist
Rating:
Bronze
•
Morningstar
Category:
UK
Large-Cap
Equity
•
Consumer
Defensive
Exposure:
35.14%
Nick
Train’s
Lindsell
Train
UK
Equity
aims
to
deliver
capital
and
income
growth
by
investing
in
UK
stocks,
and
to
beat
the
FTSE
All-Share
over
five
years.
And
while
funds
in
the
UK
large-cap
equity
category
on
average
invests
13.08%
in
consumer
defensive
stocks,
Train’s
fund
holds
35.14%
in
this
sector
–
and
like
Trojan
Global
Income,
the
largest
holding
is
Unilever
with
a
9.99%
portfolio
weighting.
Unilever
is
one
of
19
equity
holdings
in
the
fund.
Over
the
past
year,
Lindsell
Train
UK
Equity
rose
2.50%,
while
the
average
UK
large-cap
equity
fund
gained
16.73%.
The
£3.3
billion
fund
has
climbed
0.28%
year
to
date,
underperforming
the
average
fund
in
its
category,
which
rose
7.32%.
Over
the
past
five
years,
the
Lindsell
Train
fund
is
up
1.49%,
while
the
average
fund
in
its
category
is
up
4.65%.
Fundsmith
Equity
•
Morningstar
Medalist
Rating:
Silver
•
Morningstar
Category:
Global
Large-Cap
Growth
Equity
•
Consumer
Defensive
Exposure:
31.16%
The
UK’s
largest
fund,
Terry
Smith’s
Fundsmith
Equity
is
also
among
the
funds
with
the
largest
allocation
to
consumer
defensive
stocks.
According
to
its
prospectus,
the
fund’s
investment
objective
is
to
achieve
long
term
growth
by
investing
in
global
equities,
and
to
be
a
long-term
investor
in
these
stocks.
The
fund’s
allocation
to
the
consumer
defensive
sector
is
significantly
higher
than
its
category,
at
31.16%
versus
the
6.72%
average
for
global
large-cap
growth
equity
funds.
L’Oreal
(OR)
is
the
largest
consumer
defensive
stock
in
the
27-stock
portfolio,
and
the
fund’s
third-largest
holding
with
7.06%.
The
biggest
portfolio
weighting
however
belongs
to
Microsoft
(MSFT)
at
9.41%.
The
£24.7
billion
Fundsmith
Equity
rose
14.21%
over
the
past
year.
The
gain
on
the
actively
managed
fund
was
shy
of
the
19.02%
gain
on
the
average
fund
in
the
global
large-cap
growth
equity
category.
Year
to
date,
the
Fundsmith
fund
is
up
8.38%,
while
the
average
fund
in
its
category
is
up
9.89%.
Over
the
past
five
years,
the
fund
has
climbed
8.32%,
compared
to
the
8.53%
gain
for
the
category.
IFSL
Evenlode
Income
•
Morningstar
Medalist
Rating:
Silver
•
Morningstar
Category:
UK
Equity
Income
•
Consumer
Defensive
Exposure:
26.87%
The
objective
of
IFSL
Evenlode
Income,
run
by
Hugh
Yarrow
and
Ben
Peters,
is
to
provide
income
and
capital
growth
with
an
emphasis
on
income
through
investing
in
UK
companies.
The
fund’s
exposure
to
consumer
defensive
stocks
is
26.87%,
versus
the
category
average
of
12.41%.
Also
this
38-stock
fund
is
heavily
invested
in
Unilever
with
a
7.91%
weighting
–
but
four
of
its
top
five
stocks
belong
to
the
category.
This
includes
Diageo
(DGE),
Reckitt
Benckiser
(RKT)
and
Bunzl
(BNZL).
The
actively
managed
Evenlode
Income
is
up
8.16%
over
the
past
year,
underperforming
the
average
fund
in
the
UK
equity
income
category,
which
rose
18.45%.
The
£3.2
billion
fund
has
gained
1.33%
year
to
date,
while
the
average
fund
in
its
category
is
up
7.97%.
Over
the
past
five
years,
the
Evenlode
fund
has
climbed
3.65%,
compared
to
the
4.75%
gain
for
the
category.
This
article
was
generated with
the
help
of
automation and
reviewed
by
Morningstar
editors
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