More sector-specific balance sheet themes amid COVID-19 disruption

We believe that companies with strong balance sheets will be the most resilient during the current bout of economic uncertainty.

Here are themes we identified in the Financial Services, Oil & Industrial Transport, Real Estate, Technology and New Energy sectors:

• Financial Services: Companies that have excess regulatory capital will do well in this environment compared to peers.
• Insurance: Limited impact to cash generation and solvency position due to hedging programmes. The sector is well capitalised compared with the last financial crisis.
• Mining: Gold producers with established free cash flows and robust balance sheets are trading on significant discounts to our assumed gold prices.
• Oil & Industrial Transport: Oils are very exposed given the current price war but those that are not reliant on oil price or are diversified in addition to oil are well positioned.
• Real estate: The sector is far better capitalised than it has been historically so can weather near term losses of income although we are seeing companies cutting dividends to preserve liquidity near term.
• New Energy & Clean Technology: The market for solutions addressing climate change and air quality has never been stronger. We like companies that have enough cash to execute on ambitious growth plans and also weather the short-term storm.
• Technology: We looked for companies with net cash positions and high recurring revenues. We see software companies in particular, as they are defensive with their SaaS recurring revenues, ability to work flexibly and low requirement for fixed capital investment.

If you’d like to see the report, please contact Bill Dale, below.