The re-emergence of financials, retail and travel

Alison Savas


In recent weeks the wheels have been turning on a market rotation following positive news on COVID-19 vaccine developments. We now enter 2021 with confidence that it will be a year in which we see a continuing rebound in global economic activity with vaccine adoption acting as the accelerant.

However, it’s important to remember that in the immediate term there could be some further uncertainty, at least until the next reopening catalyst – most likely to be Emergency Use Authorisation for the vaccines. Further, investors should keep in mind that certain behaviours won’t revert to what we once knew as ‘normal’.

So, how can global equity investors take a pragmatic approach to reopening exposures in some of the more beaten down sectors, including financials, retail and travel?

Andrew Baud (Antipodes Consumer & Domestic Services Developed Markets Portfolio Manager) and I discussed our approach to investing in the reopening and the compelling opportunities in today’s market in the latest episode on Antipodes' Good Value Podcast. We take a deep dive into our exposure to developed world reopening beneficiaries, which has increased roughly 5% since the end of September to around 30% of the portfolio. This has come at the expense of our global defensives which have fallen 5% to around 26%.

You can listen to the full episode here, or continue reading my synopsis on the financials, retail and travel sectors below.


Investors should focus on robust retail banking franchises where credit costs have been low, as consumers have been well-supported by income stimulus and government support, and franchises which aren’t being disrupted by savvy fintechs.

Capital One Financial and ING are two compelling investment propositions. Both dominate their respective markets – credit cards in the US for Capital One and mortgages in Northern Europe for ING - with incredibly cheap valuations.

Capital One is the only large US bank fully transitioning to the cloud, which will be completed in 2021. This will give Capital One greater ability to innovate its product offering and better assess the credit risk of its customers. 

ING was arguably the original technology disruptor, with its predominantly online business model.

Both companies are valued at potential sustainable payout yields of more than 10%, which includes dividends and buybacks. Once regulatory approval to restart capital distributions has been granted, this should be a clear catalyst for a re-rating in the new year.


Ecommerce  has increased from  15%  of  total  US retail sales  at the end of  last year  to 25%, as lockdown and social distancing pushed consumption online.  Even in a reopened environment, online retail penetration  is  not  falling back to 15%. An example of a change in consumer behaviour  triggered by  COVID, that's here to stay. 

There’s been a permanent shake out across the  retail  landscape, particularly retailers dependent on mall foot-traffic. We’ve seen a handful of high-profile bankruptcies in the US,  such as  Nieman Marcus (a premium  end  department store  chain not dissimilar to David Jones in Australia) and  JC Penny  (a mass market department  store  chain).  In our portfolio we’ve  focused  on retailers that  can seamlessly  straddle both the  offline and online worlds  – otherwise known as  omnichannel  operators.

A good example is  Ulta  Beauty, one of the largest specialty beauty  chains in the US.  It’s  a similar  beauty  concept to Sephora or Mecca here in Australia but stands apart for providing both mass and prestige brands to consumers  under the one roof.

The beauty industry grows  at a fairly predictable rate of 3-4% p.a, but  we think  Ulta  can do better than that by taking more market share, largely at the expense of department stores  and  a very long tail of smaller  market  participants.  COVID forced Ulta to  shut down its 1,200 stores, but the business  was well placed from earlier  ecommerce platform  investment. Its  online sales have grown triple digits  but Ulta  also  remains a  reopening beneficiary  as customers get back to their stores  for the unique advice and experience  from testing products and  getting treatments. 

Another retail holding is  Simon Property Group, a  premium outlet centre and  mall REIT in the US (think Westfield in Australia).

Our view is that retail space in the US will consolidate into distinct formats that enable omnichannel retailing. Premium malls and  premium  outlet centres  will be survivors,  and we think Simon Property Group is a good way to capture exposure to this because of  its  scarce  premium  real estate assets. 

In terms of the US retail market, premium A-grade or better malls represent less than 25% of total malls and more than 30% by selling space. Simon Property Group has over 40% share of the premium malls and outlets in the US making it a go to partner for US retailers. The Simon portfolio  earns  over  80% of  its  Net Operating Income  from  A-grade or better rated  premium  properties. 

Adjustments will occur in the retail  industry. Some Simon  tenants will disappear, as they have during prior  retail cycles,  but they’ll be replaced by other retailers looking for access to high traffic real estate. Whilst waiting for sentiment to  improve, Simon pays a sustainable  6% cash dividend yield.

Coca-Cola is another great reopening play. Coke generates  just over  40% of its  global  revenue from on-premise consumption –  cafes, restaurants, bars  and entertainment/sporting venues. These have  all  been shuttered  thanks to lockdown and social distancing. 

As well as a reopening  opportunity,  Coke is distinctive from most other  consumer staples  by retaining  strong  influence over its bottler  supply chain, right up to delivery and stocking customer shelves. This helps the business to keep distribution costs low, maintain customer relationships and sustain pricing power.

As reopening gathers pace,  we think Coke will grow faster than its peers again  and should benefit from a relative re-rating. 


Antipodes has  grown its travel related exposures to around 4% of the  portfolio. But investors need to be selective when considering this sector.

 In our view, domestic travel comes back before international, and we  don’t  think business travel mean reverts – so companies that  are overly dependent on  business travellers may  end up being  future  value traps.  

GE is a stock we have had in the portfolio for some time, and  we’ve  always liked it for its  global aerospace  engines business  which, prior to the pandemic,  accounted  for around two-thirds of earnings. The jet engine business is a lucrative global oligopoly, where GE has 70% share of  smaller,  narrow-bodied planes – which makes it well positioned for a revival in domestic travel.

The company also  has a 50% share of  the  wide-bodied plane  market.  

We think will  also  be  a key  travel  beneficiary and it’s  not  dependent  upon  a return to  international  travel. We used  the  sharp  sell-off  in the stock  as an opportunity to  include it in our portfolio.  

Developed Market reopening clusters

Want to learn more about investment opportunities in global equities?

Antipodes Partners is an award-winning value-orientated global equities manager, offering long only and long-short investment strategies. Visit our website or click the 'contact' button below to find out more.

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1 contributor mentioned

Alison Savas
Investment Director

In almost two decades of investing in equities based in Sydney and Singapore, Alison has worked through various market cycles and navigated major market events. Alison is an investment director at Antipodes and a member of the senior investment...

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