Whether it’s politics or the global economy, it seems that 2020 could be a tough year.
Of course, things may turn out better than expected. But I think it makes sense to position your portfolio so that it can cope with all weathers.
For this article I’ve selected three FTSE 100 stocks with family ownership or owner-managers. I think the long-term perspective favoured by such firms is likely to make them a good buy for uncertain times.
Always in demand
I’m confident that the mix of food staples and budget fashion clothing provided by Associated British Foods (LSE: ABF) will remain in demand whatever happens next year.
The family-controlled FTSE 100 company owns Primark, plus food brands such as Twinings, Ovaltine, Patak’s and Kingsmill. It also owns sugar and ingredients businesses which operate in various global markets.
This unusual business is still controlled by the founding Weston family. I suspect this is one reason why ABF is almost debt-free and has delivered at least 21 years of unbroken dividend growth.
The ABF share price has been weak over the last couple of years, as the group is going through a period of slow growth. The shares now trade on 15 times earnings, with a 2.2% dividend yield. That looks reasonable to me. I think this could be a good opportunity for new buyers to get on board.
Better than a bank?
Family ownership is an important feature of fund management house Schroders (LSE: SDR). This 215-year-old City firm has a classy reputation and conservative finances.
Like ABF, Schroders hasn’t cut its dividend for at least 21 years — the oldest data I could find. That means that unlike many City rivals, Schroders’ dividend was not cut during the financial crisis.
Growth has weakened over the last couple of years, but Schroders has recently launched a new joint venture with Lloyds Banking Group that will add £45bn of assets during the latter part of this year.
This isn’t a stock I’d expect to get on the cheap. But I think it’s worth paying a fair price for quality. SDR stock currently trades on about 15 times 2019 forecast earnings, with a 4% dividend yield. In my view, that’s a fair price. I’d be happy to buy at this level.
A turnaround bargain?
Mining and trading group Glencore (LSE: GLEN) is run by chief executive Ivan Glasenberg, who has an 8.7% shareholding that’s worth about £2.8bn at current levels.
However, the value of Mr Glasenberg’s shareholding has fallen by around £1bn over the last year, as the Glencore share price has crumbled.
The firm faces an uncomfortable mix of problems. Investigations into alleged corruption could result in big US fines. The group’s copper mines in Africa have been underperforming. And Glencore faces pressure to exit its coal business, which remains a major source of profit.
However, the group’s trading division continues to pump out reliable profits and cash generation remains strong. Decisive changes are under way to improve the performance of Glencore’s mining operations.
The shares aren’t without risk. But I suspect Mr Glasenberg will want to turn this business around before he retires.
It now trades on just 10 times 2020 forecast earnings, with a dividend yield of 5.9%. I rate GLEN as a turnaround buy.
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Roland Head has no position in any of the shares mentioned. The Motley Fool UK has recommended Associated British Foods and Lloyds Banking Group. Views expressed on the companies mentioned in this article are those of the writer and therefore may differ from the official recommendations we make in our subscription services such as Share Advisor, Hidden Winners and Pro. Here at The Motley Fool we believe that considering a diverse range of insights makes us better investors.
Motley Fool UK 2019