The stock markets continue to roil. Bargain-hunting is definitely an option in this climate, but for the nervous investor it might be wise to revisit some old favourites. Household goods and food are seen as defensive stocks in a downturn as people still need to clean and eat even as they are cutting back on luxuries. 


London-listed Reckitt Benckiser spans both sectors, making a range of goods with instantly recognisable brands. From French’s mustard to Veet hair removal cream to Dettol antiseptic, there will be at least one Reckitt product in most European households. 


Any fears that customers might be switching to cheaper or own-brand products in the face of the downturn were blown away by the company’s third quarter results. 


Reckitt has managed to increase revenues by 10%, powered by growth of 17% in emerging markets. Even in markets where the economies have started to shrink it maintained growth – at 7% in Europe and 6% in North America and Australia. 


Margins remain staggeringly high considering the company increased spending on advertising. The group raised prices but gained market share, and improved its mix 
of products, which helped offset higher 
raw materials costs. As a result, Reckitt 
eked out an extra 1% of profitability 
in the third quarter compared with the same period last year, pushing margins up to 23%. 
This compares with rival Unilever at around 13%. 


Reckitt’s pharmaceutical business will shrink rapidly from 2010, when patents expire on Suboxone, an alternative to methadone for addicts trying to get off heroin. The company has spelt this out often enough that it should already be reflected in the share price. 


Andrew Wood, an analyst at research house Sanford C. Bernstein, says the question most frequently asked about Reckitt is: ‘How do they do it?’ He admits that his answer tends to be: “We don’t really know…they are simply extraordinary operators.” Reckitt has outperformed London’s FTSE 100 index by a considerable margin over the past two years, and there is no reason to see why it should not continue to do so. 


The management team are always suitably prudent in their forecasts, which they then beat convincingly to investors’ delight. In this year of economic doom and gloom they are predicting a healthy 13% rise in revenues. 


The shares are trading on around 16 times next year’s earnings, with an expected dividend yield of around 2.7%. But the premium seems justified for a company with such an impressive track record and apparent resilience to the global economic turbulence. 


On the continent, France is often mocked for protecting yoghurt-maker Danone from foreign predators as ‘a national champion of strategic importance’. The fact is that even though the company does not provide the country withelectricity or weapons, 
Danone is a powerhouse 
of the French economy, selling €13bn worth of yoghurt, baby milk and bottled water last year.


It too relies on well-known brands, from Evian to Activia. During the downturn it expects consumers to flock to both the high and low-end of the market, while middle-of-the-range products will suffer. 


As such, Danone is focusing on its luxury Actimel and Activia brands, which differentiate themselves from other products with added health benefits. It is also launching a new budget product called €copack, which has already boosted sales in Poland without stealing market share from the group’s high-end brands. 


Water sales are suffering in the UK, France, and to a lesser extent Spain, due to environmental concerns and consumers cutting back on non-essential items as the credit crunch starts to hit their pockets. Growth in Asia and Latin America should, however, offset any weakness in Europe. 


In terms of baby food, the company is likely to benefit from the powdered milk scandal in Asia as consumers flee the contaminated brands. 


Like Reckitt, Danone’s third quarter results showed remarkable resilience to the current consumer slowdown, with revenue growth 
of more than 8%, comfortably beating analysts’ expectations. 


The company is good at keeping investors informed. As a result, they can be confident of its forecasts and have a good idea of future performance – a blessing in these uncertain times. 


The French company currently expects to increase revenues by between 8% and 10% this year, stripping out the impact of sales and acquisitions. 


The shares, which are listed on Paris-based Euronext, are trading on around 13 times next year’s earnings with a yield of around 2.5%, which looks attractive for a company this solid. The market appears to be underestimating Danone’s ability to ride out the storm, despite convincing evidence to the contrary. 

the 


collector

Simon de Burton recommends what the savvy investor should be bidding for this month

In the world of open-plan living where clean spaces and neutral colours rule, so-called ‘brown furniture’ has fallen drastically out of favour. Mahogany, walnut and oak pieces that were once considered status symbols in homes throughout Europe are now seen as being dowdy, dull and therefore virtually worthless.


True, the best and rarest still make money, but the market for readily available brown furniture has never been so low, with George III bureaus that fetched £1,000 in the early 1980s selling for £100 and linen presses that once made £2,000 struggling to reach £500.


Which must lead the intelligent antiques enthusiast who believes that ‘what comes down must go up’ to the conclusion that the brown stuff must now be worth snapping-up. 


“The sort of items which people use for general furnishing are totally out of fashion and hence have plummeted in value,” says Thomas Jenner-Fust of Gloucestershire auctioneers Simon Chorley.


“Many auctioneers have given up their household or general sales as the market is so poor, but in increasingly eco-conscious times buying brown is the green decision. Not only is it the ultimate form of recycling but it will last longer than anything from IKEA.”


Jenner-Fust adds that the quality of most Victorian and Edwardian furniture far exceeds that made today, and even pieces in poor condition can be restored to provide sterling service for generations to come. Used thoughtfully, kept highly polished and teamed with fresh, background colours, classic pieces can lift any room and they come in myriad shades and wood varieties. 


If you’re looking for a ‘starter’ piece, might we suggest a Victorian or Edwardian kneehole desk? These fell drastically out of favour when bulky PCs were ubiquitous but now that most of us are switching to wireless laptops they have practical appeal once more. Far more stylish than a soulless glass and chrome work table any day.


Christie’s Interiors Sales


London, Christie’s


2 December and 16 December


New this year, Christie’s London has started holding regular Interior sales at its South Kensington branch, aiming them at the bargain-hunting public rather than dealers. One recent lot was a classic ‘brown wood bargain’ — a late Victorian stained-wood Chesterfield sofa, which sold for its lowest estimated price of €700. Two Interiors sales will be held this month.


The Studiolo


Old Master Paintings and Works of Art from Luigi Koelliker’s London Residence


London, New Bond Street, Sotheby’s


3 December


An opportunity to buy items from the collection of Italian car importer Luigi Koelliker, including a late 18th-century, alabaster-topped Roman commode withextraordinary marquetry (est. €175,000—€300,000) and a flame mahogany Secrétaire à Abattant Empire, c. 1805 (€80,000—€130,000).

Important Continental 
Furniture, Ceramics and Clocks


London, Sotheby’s


2 December


maritime art


New York, Christie’s


3 December


Important European 
Furniture & Sculpture


London, Christie’s 


4 December


Furniture and Ceramics


Milan, Sotheby’s


11 December



European Furniture, 
Clocks, Sculpture


Amsterdam, Christie’s


16 December


Mobilier et Objects d’Art


Paris, Christie’s


16 December



18th Century furniture 
and works of Art


Paris, Sotheby’s


17 December


www.christies.com


www.sothebys.com