One notable casualty of the current crisis is interest rates.
At a special meeting on 19 March, the Bank of England’s Monetary Policy Committee voted to cut the Bank rate to 0.1%. The Bank rate is the interest rate that the Bank of England charges other banks for borrowing.
So the central bank’s rate influences most other bank interest rates. Indeed, cash savings accounts are paying paltry interest rates and returns from savings are on the floor!
Quality shares on sale
And that’s why I’m shunning cash savings and aiming to invest money in the stock market. I reckon decent potential gains could be achievable from shares if I choose carefully and hold them with a long-term investment horizon in mind.
For example, branded soft drinks provider Britvic (LSE: BVIC) looks perky today on the release of the half-year results report. The company owns popular non-alcoholic brands such as Fruit Shoot, Robinsons, Tango, J2O, London Essence, Teisseire and MiWadi. And it also produces and sells PepsiCo brands such as Pepsi, 7UP and Lipton Ice Tea.
In today’s report, the company declared a “robust start to the year,” and said it is “ well-placed to navigate the challenges of Covid-19″ And the figures look good. After adjusting for an altered accounting period, revenue for the six months to 31 March came in 1.4% higher compared to the equivalent period last year. And adjusted earning per share moved almost 3% higher.
Chief executive Simon Litherland explained in the narrative the market for soft drinks is resilient. But “while confident of liquidity,” the directors have put off the interim dividend and will decide later in the year whether to pay it.
Meanwhile, Britvic reckons since mid-March, government restrictions on people’s movement and on trading activity in the hospitality industry have “significantly impacted” out-of-home sales and on-the-go consumption. Packs for at-home consumption have increased in volume, but it has seen an “adverse pack mix”.
Britvic looks set to survive and thrive
With that being the case, I reckon recent news about the gradual lifting of restrictions is helping the shares. On top of that, the absence of any hidden nasties in today’s report has probably caused investors to feel less anxious about the immediate outlook for Britvic.
Indeed, after a period of consolidation since the end of March, the stock appears to have broken higher today. On its own, that movement means nothing. But taken with the positive fundamental news, I think it is encouraging.
Britvic falls into the category of companies that I’d classify as defensive. Meaning cash-generation tends to be steady. And the cyclical ups and downs of the economy do not tend to affect operations too much Indeed, prior to the coronavirus crisis, the company had a good record of raising the shareholder dividend a little each year.
I’m satisfied that Britvic can survive and thrive from here. And now I see the ongoing weakness in the share price as an opportunity.
