After the end of ‘Beer Day Britain’, Bestinvest managing director Jason Hollands thinks investors might want to consider these five funds to invest alongside their love of a pint.
‘Beer Day Britain’ - the national annual celebration held on 15 June – would have brought pubs, bars and breweries much welcomed extra business after a period of hardship.
Ever since Covid-19 pandemic brought the entire industry to a virtual standstill last year, pubs and bars have long-awaited a full re-opening.
Combined with the arrival of sunny weather and regular sporting events, their eventual re-opening is expected to provide a much-needed boost to their sales.
Hollands said: “Both brewers and pubs have had a really tough time during the pandemic, particularly rural pubs, many of which will sadly not be reopening their doors again.
“While breweries were able to refocus on sales through supermarkets and off-licences, this has been tough for smaller breweries who were less geared up to switch to the demand for larger packs. The rocketing price of both hops and packaging have also squeezed margins.
“Yet over the longer-run, beer has proven to be very resilient in most economic ups and downs. When times are tough you might put a long-haul holiday or new car purchase on hold, but few regular beer drinkers will forgo their favourite pint.”
Whilst there are many smaller brewers and pub chains for UK investors to take advantage of the potential surge in beer drinking, Hollands said the “really big money in the world of beer is with the large international giants”.
These include Belgian-headquartered brewer Anheuser-Busch InBev, British multinational Diageo and the Dutch firm Heineken.
With this in mind, Hollands shared five funds that have varying levels of exposure to beer and pubs.
Lindsell Train Global Equity and LF Lindsell Train UK Equity
The first two picks are the £9bn Lindsell Train Global Equity fund and the £6.6bn LF Lindsell Train UK Equity fund.
“When it comes to backing beer, the fund management company planted firmly at the corner of bar is Lindsell Train,” Hollands said.
“Managers Nick Train and Mike Lindsell are long-term, buy and hold investors prepared to take big positions in their preferred companies.
“They like businesses which generate lots of cash, which brewers do. In the Lindsell Train Global Equity fund they hold a whopping 8.52 per cent of the fund in Diageo and 7.72 per cent in Heineken, making these their two largest holdings.
“Both stocks are also held in their LF Lindsell Train UK Equity fund, with Diageo in top place at 9.86 per cent and Heineken at 6.04 per cent of the fund. The latter fund also has a small holding in Young & Co.”
Performance of funds vs sector & benchmark over 5yrs
Source: FE Analytics
Over the last five years, Lindsell Train Global Equity has made a total return of 130.70 per cent, outpacing the 102.57 per cent from the MSCI World Index and 97.52 per cent from the average IA Global peer. It has an ongoing charges figure (OCF) of 0.65 per cent.
LF Lindsell Train UK Equity has returned 76.66 per cent over the last five years, compared to 52.73 per cent from the IA UK All Companies sector and 49.8 per cent from the FTSE All Share. It has an OCF of 0.65 per cent.
BMO European Select and ASI Japanese Equity
The next two funds Hollands highlighted were Philip Webster’s £263m BMO Select European Equity fund and the £60m ASI Japanese Equity fund.
“While no other funds come quite as heavily weighted to beer stocks than Lindsell Train, other larger holders of breweries include the BMO European Select fund, which has a 5.58 per cent position in Heineken, and the ASI Japanese Equity fund which has 4.93 per cent invested in Asahi,” Hollands said.
“Alongside its iconic Japanese lager brand, Asahi’s beer portfolio includes Pilsner Urquell, Peroni and London Pride as well as craft beer names Hophead and Meantime.”
Performance of funds vs sector & benchmark over 5yrs
Source: FE Analytics
Over the last five years, BMO Select European Equity has delivered a total return of 82.58 per cent, compared with an 85.6 per cent gain from the FTSE Developed Europe ex UK index and 81.45 per cent from the average IA Europe ex UK peer. It has an OCF of 0.83 per cent.
ASI Japanese Equity is up 50.17 per cent over the last five years, compared to 72.18 per cent from the average IA Japan peer and 66.87 per cent from the MSCI Japan Index. It has an 0.87 per cent OCF.
ASI UK Equity Unconstrained
The last strategy Hollands pointed to is the £445m ASI UK Unconstrained Equity fund run by Wesley McCoy.
He said: “When it comes to investments in pubs, the ASI UK Equity Unconstrained fund has 3.13 per cent invested in Mitchell & Butlers alongside 1.52 per cent invested in brewer Marston’s and a 1 per cent position in The Restaurant Group which owns rural pub chain Brunning & Price alongside its other chains.”
In February this year, Martson’s - which owns around 1,400 pubs - rejected an offer worth roughly £690m from a US private equity firm.
At a time when UK shares are relatively cheap for overseas investors, Hollands argued that there is potential for further acquisition attempts by overseas buyers.
Performance of fund vs sector & benchmark over 5yrs
Source: FE Analytics
Over the last five years, ASI UK Equity Unconstrained has delivered a total return of 39.79 per cent, compared to a 46.54 per cent gain from the FTSE 350 (ex IT) Index and 52.73 per cent from the average IA UK All Companies peer. It has an OCF of 1.15 per cent.