As the World Cup draws to a close, M&G fund managers Stuart Rhodes, Phil Cliff, Jamie Horvart have built a team of stocks.
The trio believe the 11 stocks have the capacity to deliver the goods in a 4-4-2 formation, with each one offering different qualities to thrive in their desginated postions.
So who made the M&G starting 11?
Roche. Defensive pharmaceutical stock well positioned to protect dividend growth.
'One of the key players in cancer treatments, the company possesses a strong pipeline of existing drugs as well as new launches which are showing promising results.
'We expect to see Roche protect its margins as well as news of dividend growth, reflecting the company’s solid performance.'
Unilever. Defensive stock with quality and pace.
'Despite its defensive status, Unilever has a genuine growth story which differentiates the company from its peers. While many consumer staples businesses have seen their growth rates deteriorate, Unilever has continued to deliver.
'Unilever has a strong brand portfolio, a broad distribution capability with a significant presence in emerging markets and a disciplined management team committed to returning generous amounts of cash to shareholders.
'The company has raised its dividend by 8% this year and pledged to buy back €6 billion of stock. We expect the dividend to keep growing at a reasonable pace in the years to come.'
Compass. More than just defence.
Selected by: Rhodes
'Compass is another defensive stock which can provide more than just stability. The food service company is a beneficiary of the structural growth in its industry, driven by the global trend towards outsourcing, and offers a geographic spread which belies its UK listing.
'The company has been disciplined in its pursuit of growth and has a history of rewarding shareholders with plenty of cash. Compass has a long track record of consistently increasing its regular dividend payments topped up by special dividends when circumstances allow.'
Novartis. An experienced head
Selected by: Rhodes
'A stalwart in defence, Novartis has been a core holding in the M&G Global Dividend Fund since its launch in 2008. The Swiss pharmaceutical company has increased the dividend 75% over 10 years and the shares have outperformed global equities during that time.
'Novartis is a global business which remains well placed in a growing industry which aims to address the medical needs of an aging population.'
Parker Hannifin. A good reliable operator.
'The company is a diversified manufacturer of motion and control products & systems, connected to underlying economic growth and any industrial recovery. Specifically, it is geared into rising defence spending and increases in narrow body airline orders.
'Parker Hannifin’s management is aiming to achieve better organic growth through gains from M&A synergies, operating in a leaner way and working capital improvements. Furthermore, it has an extensive supply chain and distribution networks, which the company aims to use more efficiently to boost the bottom line, putting it in a stronger competitive position.
'The company is generating strong free cash flow which combined with returning cash to shareholders means it is well placed to deliver double-digit earnings growth for the next few years.'
Alphabet. A diversified holding company with a variety of exciting sources of growth.
Selected by: Jamie Horvat, Manager of the M&G Global Themes fund
Alphabet (Google) is a holding company which has a number of different businesses with a range of growth drivers. The Google segment includes internet products such as Search, Ads, Commerce, Maps, YouTube, Android, Chrome and its hardware initiatives. The Cloud business is gaining momentum and will be driven by increasing demand for data storage in this safe and secure medium. The autonomous vehicle division, Waymo, provides a degree of option value and management has ambitious targets for its roll out.
Alphabet’s company fundamentals are strong and it looks set to remain a primary beneficiary of the secular shift to online spending. Given its robust earnings growth of around 20% for at least the next few years, it deserves to trade at a slight premium to the index average.
RELX. Analytics innovator with a drive to improve the quality of earnings
Selected by: Cliff
'RELX is a global provider of information and analytics for professional and business customers across a range of industries.
'Launched in 1800 as the Elsevier publishing company it is in the process of completing one of the most impressive business transformations, shifting its focus from a paper based reference tool towards digital databases using algorithms and artificial intelligence which allow instant access to data by connecting entire networks of databases.
'As a result, customers can access information quickly and make well informed business decisions faster.
'This drive for innovation will continue to improve the quality of the company’s earnings as digital solutions and subscriptions-led revenues continue to grow as a share of the company’s revenues.
'Its fastest growing division, the Risk Business Information (RBI) currently represents 45% of profits. We expect the company’s offering to be taken up by a growing number of industries such as insurance companies, governments and any companies offering credit.'
CTS Eventim. Leader in its field benefiting from shifts in the music industry
Selected by: Cliff
'CTS Eventim is the European leader when it comes to ticketing services for concerts, festivals and other events.
'The company will benefit from the major shifts currently witnessed in the music industry such as the increasing demand for experiences and live concerts.
'As the market evolves, the need for more online solutions to both purchase tickets and to capture customers’ music preferences is growing.'
'The company’s ticketing business is key, since despite accounting for "only" 42% of the revenue, it represents more than +75% of the profit.
'Very light in terms of assets, it has a very positive working capital dynamic as customers pay for their ticket months in advance of most concerts, while CTS doesn't have to pay their suppliers - promotors and artists - until after the concerts. The average ticket price is also rising, showing a return of pricing power to the industry.'
Dominos’ Pizza. Strong UK brand with presence in Ireland, Switzerland, Luxembourg and Lichtenstein
Selected by: Cliff
'Although the company trades at a premium to the sector it offers greater growth on the back of a very strong brand and solid execution from the management.
'In addition, the company’s fit-out costs are nearly half of those of bigger players in the sector, explaining the company’s superior profitability.
'The company has already delivered strong results in Q1, with overall sales up 18.3% and the opening of 11 new stores. The company confirmed its objective of 65-75 new openings this year as well as a share buyback.
'The stock has been performing strongly and we hope that the England team’s possible presence in the later stages of the tournament will boost orders for the quarter!'
DS Smith. Innovative packaging company with a strong growth potential
Selected by: Cliff
'DS Smith is an innovative British packaging company launched in 1940, at the forefront of innovation in packaging design. Its growing share of bespoke packaging, for which customers are ‘stickier’ and show more brand loyalty.
'The company also has its own collection and recycling network and is set to benefit from consumers’ preference for recyclable packaging as opposed to plastics.
'The company has just entered the US market with the acquisition of Interstate Resources for £1.8 billion, a move which will offer further growth opportunities.
'DS Smith just reported excellent results for the full year and the company continues to focus on innovation to deliver sustainable solutions for packaging and on strategic ad hoc acquisitions.'
DBS (Development Bank of Singapore). A nimble innovator
Selected by: Horvat
'DBS is one of the largest banks in Asia with around 280 branches in 18 markets.
'It provides services across wealth management, consumer banking and institutional banking. It is a beneficiary of the rising of the Asian middle class and increasing intraregional trade.
'It has also exposure to Greater China and will be a beneficiary of the Belt and Road Initiative. It is at the forefront in terms of technology, with the aim of transitioning to a digital service which should drive higher revenue per customer, as well as decreasing the cost of acquisition of new customers.
'Being 50 years old it is a relative newcomer and given it is not hampered by legacy issues, it can be more nimble in its operations. Management has been building up capital in preparation for Basel 2022 rules – as a result, it is now overcapitalised so can reward shareholders by returning cash to them.'