With 2020 almost upon us, and no resolution to macroeconomic uncertainties, notably Brexit, in sight, I think the time is right to start looking at investments that can ride them out.
To this extent, legendary investor Warren Buffett’s investment philosophy can be a good guide to help investors navigate the chaos. Long-term investing in quality shares is one of his key criteria, and that sounds like an appealing idea to me at a time when the short term can really not be predicted.
Healthy financials and steady share price gains over time are some of the characteristics of companies that fit into this profile. The good news is that there are plenty such in the FTSE 100 universe alone.
Immune to cycles
One is property developer The Berkeley Group Holdings (LSE: BKG), whose share price has almost doubled over the past five years alone. Its average price for 2019 so far is 3821p, compared to 1,948p in 2014 despite being a cyclical stock susceptible to dips in economic growth. This is likely linked to its gravity-defying revenue increases over the years, even though its profits have been less dependable.
While the Berkeley Group’s perspective is quite sunny, as evident from the trading update released in September, realistically, Brexit could throw a spanner in the works. No one knows how the Brexit saga will play out, but if we go back to the Oracle of Omaha for guidance, there’s reason for comfort. He has been positive on investing in the UK, despite believing that the Brexit leave vote was a mistake. This makes the Berkeley Group a share I would definitely consider investing in for 2020.
Steady ship
A less obvious choice investment choice in the Warren Buffett context is international distribution and services provider Bunzl (LSE: BNZL), whose share price has remained almost flat year-t0-date on average in 2019, compared to last year.
Over the past five years, Bunzl has offered an over 50% gain on capital. It’s true that there are better performing shares, but I like its financial performance, which has seen a steady increase in revenue, and that its profits have remained steady.
It also ticks other boxes – it’s a geographically dispersed share in a defensive sector with little competition, which makes it relatively immune to unpredictable macroeconomic times, a key consideration for me, keeping Brexit in mind. BNZL operates in 30 countries, including geographies like North America and Europe, including the UK and Ireland.
I like that its share price is relatively muted right now, which is another Warren Buffett criterion. In other words, it’s value for money with the latest share price at 10% below the average level seen in the past year. And this is despite the fact that it’s expected to continue performing, making it a 2020 pick for me as well.