Adults and young adults have changed the way they spend compared to the last generation. Things like wellness are now more important than ever. For investors, this presents opportunities.
Here are three share ideas that could benefit.
Investing in individual companies isn’t right for everyone. That’s because it’s higher risk, your investment depends on the fate of that company. If that company fails, you risk losing your whole investment. If you cannot afford to lose your investment, investing in a single company might not be right for you. You should make sure you understand the companies you’re investing in and their specific risks. You should also make sure any shares you own are part of a diversified portfolio.
This article isn’t personal advice. If you’re not sure an investment is right for you, seek advice. Investments will rise and fall in value, so you could get back less than you invest.
Apple
Apple’s hardware sales are still very much its bread and butter. But looking at the stock through the lens of young people and trends that are important to them, there are some extras to think about.
People are spending less on going out and spending more on entertaining at home, including on streaming. This will likely continue over time and that makes Apple TV something to watch closely. It’s not the biggest in the streaming space and that means it has more room to grow, so long as the content slate is enticing enough.
The other trend that lends itself to younger adults is again the idea of wellness and wellbeing. The Apple watch is a well-positioned product to capture this market and is becoming more important. The Wearables, Home and Accessories division, which includes the Apple watch, made up $13.5bn of Apple’s $117bn net sales in the first quarter.
Like with a lot of the big tech names, Apple’s had a strong start to 2023 in terms of its valuation. However, there are a growing number of voices warning that the second half of the year could be challenging for markets. Investors should keep that in mind when looking at stocks trading at a premium.
Remember, before you can trade US shares, you need to complete and return a W-8BEN form.
SEE THE LATEST APPLE SHARE PRICE AND HOW TO DEAL
Diageo
Another theme to dig into is the increasing trend for mindful drinking, which essentially means more people cutting back on alcohol.
Drinks giant Diageo is still very much reliant on the traditional alcohol market. But its well-known brands are also in prime position to capitalise on the trend for alcohol-free versions of favourites.
One that springs to mind is the relatively new Guinness zero. Guinness is one of the most successful drinks brands ever created and we have high hopes for the non-boozy version. There’s also an alcohol-free Gordon’s gin, and a host of others.
There are smaller brands offering boozeless drinks, but it can be a lot easier to take market share of this industry when customers already recognise and trust your brand as quality.
Diageo is a high-calibre company, and not just because of this specific growth avenue. But it’s not all clear skies ahead. After 10 years, Diageo's Chief Executive, Sir Ivan Menezes is stepping down from the board.
We think succession planning is being handled well. However, a changing of the guard at the top always adds a layer of strategy and execution risk in the short term.
SEE THE LATEST DIAGEO SHARE PRICE AND HOW TO DEAL
L’Oréal
Beauty and wellbeing is an increasingly important trend for adults and young adults today. With that in mind, it’s worth looking at L’Oréal, which is the world leader in beauty and has annual revenue approaching EUR40bn.
L’Oréal is making moves into the more luxury end of the wellbeing market. The group recently completed a $2.5bn acquisition of Aesop, the Australian skincare specialist. This end of the market has real growth potential and is arguably more insulated from the ups and downs in the economy. It’s very much tapped into the self-care, ‘treat yourself’, category.
Aesop also has a handle on male grooming and skin care. This is a growing market, with potential for L’Oréal. But this will likely only be a small part of the overall stock story.
The business has a longstanding history of targeted acquisitions. It’s built up a high-quality portfolio across consumer products like Garnier and Maybelline, luxury titles including Urban Decay, and professional products and skincare which includes La Roche-Posay and CeraVe.
There’s a lot to like about L’Oréal, but the wider beauty industry is going through a lot of change with challenger brands. That means the group, and other beauty and consumer giants, will need to peddle hard to keep their edge in the years ahead.
SEE THE LATEST L'ORÉAL SHARE PRICE AND HOW TO DEAL
Unless otherwise stated, estimates, including prospective yields, are a consensus of analyst forecasts provided by Refinitiv. These estimates aren’t a reliable indicator of future performance. Yields are variable and not guaranteed. Investments rise and fall in value so investors could make a loss.
This article is not advice or a recommendation to buy, sell or hold any investment. No view is given on the present or future value or price of any investment, and investors should form their own view on any proposed investment. This article has not been prepared in accordance with legal requirements designed to promote the independence of investment research and is considered a marketing communication. Non-independent research is not subject to FCA rules prohibiting dealing ahead of research, however HL has put controls in place (including dealing restrictions, physical and information barriers) to manage potential conflicts of interest presented by such dealing. Please see our full non-independent research disclosure for more information.
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