Things to keep in mind for the perfect Footsie portfolio for 2020

  • Jan 06, 2020 GMT
  • Team Kalkine
Things to keep in mind for the perfect Footsie portfolio for 2020

Footsie or the FTSE 100 index, created, managed and maintained by the FTSE Russell company, is the headline index of the London Stock Exchange. The Index comprises of the largest companies listed on the London Stock Exchange, in terms of revenue and market capitalization. The Index itself commands the second highest market capitalization among all its cousin indices of the FTSE Russell company with the first being the FTSE All Share Index. The index, which came into being on 3 January 1984, has changed in character over the years, reflecting the changing character of the London Stock Exchange itself.  Until recently the FTSE 100 was regarded as the barometer of the British Economy, but over the years more and more of its constituent companies have expanded their businesses internationally and have increasing proportion of their earnings coming from foreign sources. The coveted position of being the barometer of the British Economy now rests with the FTSE 250 index.

The Year 2020 brings in new possibilities for the London Stock Exchange altogether. In the post-Brexit era, there will be new economic and business alignments and realignments. While for some companies the event will bring in unprecedented challenges, for some there will be a windfall of opportunities. Also, what needs a special attention is the government’s finance and economic policy in the new year. The Bank of England as well as the treasury of United Kingdom have taken measures and will be taking measures in immediate future on the backdrop of Brexit that will have far-reaching consequences for the economy of the United Kingdom and its businesses as a consequence. Whatever major changes that might come about due to the above will have a defining impact on the fortunes of the London Stock Exchange constituent companies with most FTSE 100 constituents also being affected despite their international exposure.

Someone, therefore, who is interested to build a new portfolio comprising only of Footsie constituent companies, must keep the above considerations in mind. Other than that, the below five are additional important factors that must be kept in mind, given the existing conditions, to build a perfect footsie portfolio.

  1. Index with increasing amount of foreign earnings – The FTSE 100 index has over the years been gaining importance as an international index. On account of more and more companies with international revenue finding place on the index the index has now got an international flavor. This aspect of the index also makes it the least risky among all other indices as it is able to balance out its risk related to the domestic economic factors against international revenue coming from multiple geographies. Investing in such constituent companies of the index will not only make the portfolio of the investor decisively less risky but will also give the investor the cushion of international revenues, which additionally protects him from the deterioration of the British pound.

Some of the companies on the FTSE 100 List with the above feature are the Vodafone Group Plc , the Rio Tinto Plc , RELX Plc, Prudential Plc, Pearson Plc, Mondi Plc, InterContinental Hotels Group Plc, Glencore Plc, GlaxoSmithKline Plc, Fresnillo Plc, Ferguson Plc, Compass Group Plc, Coca-Cola HBC AG, Centrica Plc, BT Group Plc, JD Sports Fashion Plc, British American Tobacco Plc, BHP, AstraZeneca Plc and Anglo American Plc.

  1. Largest Dividend distributing companies on the London Stock Exchange – In the Financial year 2019, the FTSE 100 constituent companies were the ones who distributed the most cash in terms of dividends among their shareholders. The dividends paid during the year were records of sorts in terms of quantity of money paid out and yield in recent years. Most of the companies who have paid good dividends during the previous year are most likely to repeat the same this year as well as the economic situation in the country is expected to be much better now.

Top companies on the FTSE 100 list good dividends during the previous year are Micro Focus International Plc, Imperial Brands Plc, BP Plc, Rio Tinto Plc, British American Tobacco Plc, Imperial Brands Plc, Standard Life Aberdeen Plc, Barratt Developments Plc, Royal Dutch Shell Plc and Reckitt Benckiser Group Plc.

  1. Home to the largest Oil companies – Though only two in number on the FTSE 100 index, both BP Plc and Royal Dutch Shell Plc have a significant weightage on the Index as well as a significant impact on the British Economy. Other than being the largest automotive fuel suppliers to the British economy, these two companies more often than not are amongst the top five constituents of the index and exert significant influence on the movement of the index as well as the market in its entirety.

  1. Housing stocks on the index will benefit the most from government policy – In the post-Brexit scenario, the new United Kingdom will be focusing on providing sops to the housing sector to promote more affordable housing to its citizens. While the government has reiterated this commitment time and again, concrete steps in this regard are expected to come post Brexit. The companies on the FTSE 100 index which will benefit the most due to this change of government stance will be Barratt Developments Plc, The Berkeley Group Holdings Plc, Persimmon Plc, Reckitt Benckiser Group Plc and Taylor Wimpey Plc.

  1. Retailers, with most cash businesses, will benefit the most – In the Post Brexit era, in the near term there will be a sluggish credit offtake, which will be affecting most other industries except retail companies which have most of their business in cash. Post 12 December 2019 General elections, improvements have started to show in the form of increased sales across major retail chains in United Kingdom. In the new year, this trend will continue and all of the companies in this industry are expected to see improvement in their fortunes.

The companies on the FTSE 100 list belonging to this list are Burberry Group Plc, JD Sports Fashion Plc, Kingfisher Plc, Next Plc, Unilever Plc and Associated British Foods Plc.

Other than the above five, there are also a number of other ideas that an investor can consider about the FTSE 100 constituent stocks that make them fit investment cases for 2020. The investor should, however, make a thorough review of every aspect of a target company before making any investment decision.

With Bank of England reducing the interest rates to a historic low level, the spotlight is back on diverse investment opportunities. 

Amidst this, are you getting worried about these falling interest rates and wondering where to put your money?

Well! Team Kalkine has a solution for you. You still can earn a relatively stable income by putting money in the dividend-paying stocks.

We think it is the perfect time when you should start accumulating selective dividend stocks to beat the low-interest rates, while we provide a tailored offering in view of valuable stock opportunities and any dividend cut backs to be considered amid scenarios including a prolonged market meltdown.

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