12. January 2021 | 07:28 CET
TUI, RYU Apparel, BYD: Where sustainability is rewarded with returns
Sustainability is a trend that is affecting all industries - some sooner, others later. While carmakers have been paying attention to lower fuel consumption and fewer exhaust emissions for years, today, clothing manufacturers and tour operators are also under pressure. Customers want to know what environmental and social footprint certain products and services leave behind. For companies from traditional industries that are already sustainably positioned, this can be a good selling point that also benefits share prices on the stock market.
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ISIN: CA74979J4072 , DE000TUAG000 , CNE100000296
TUI: When survival is the only thing that counts
Tour operator TUI has been committed to sustainability for some time and describes "sustainable tourism" as a "matter of the heart" on its website. Although these warm words are likely to be grist to the mill of sustainably-minded potential customers, investors expect more. The travel group's main problem is and remains the Corona pandemic and the severe restrictions it entails.
Only recently, an extraordinary shareholders' meeting approved a capital injection for TUI. Among other things, the German government is coming to the beleaguered group's aid and injecting additional money. However, the conditions were quite strict for existing shareholders: For 29 old shares, there are 25 new ones at a price of EUR 1.07. These conditions have put the share price under quite a bit of pressure.
The TUI share is currently trading below the EUR 4.00 mark. Given the uncertainty surrounding the length of the existing lockdowns and the vaccination outlook, which is still not very clear for many people, tourism could remain under pressure for some time. In addition to concerns about their own health abroad, customers also shy away from cancellations, travel warnings, and the associated paperwork. Many travel agencies are also facing closure - this indirectly plays into the hands of pure online providers and is not good news for TUI. Given these conditions, the share is anything but a good investment.
Although the stock is likely to start a recovery rally in the coming months, the timing of the rally cannot be predicted in advance. The stock is only suitable for gamblers. At TUI, only the catchy advertising text on their website is sustainable. Everything else is up in the stars because of the Company's tense situation.
RYU Apparel: Turnaround with vision
One Company that already has sustainability in its name is RYU - Respect your Universe. The clothing brand from Canada specializing in sports and casual fashion has had an eventful history. The share price crashed from CAD 2.65 to CAD 0.05 between March 2018 and March 2020. Then shareholder and serial founder Cesare Fazari took over the helm at RYU and turned the brand around.
In addition to modern designs, RYU improved internal processes around shipping and warehousing and explicitly invested in marketing. The collaboration with a product placement agency should bring RYU to Hollywood, and the outfitter contract with the Canadian skateboard team should make the brand even better known among young customers. Also on offer from RYU: golf clothing. For this category, the Company gained a talented designer and ex-golf pro, Andrew Parr, a few weeks ago.
Since its low of CAD 0.05, the share price has tripled, but the operational turnaround initiated by RYU CEO Fazari has not yet really taken hold in the market. Only when this is confirmed by figures or the RYU brand becomes better-known thanks to some successful placements should most investors recognize the share's further potential. Until then, the stock remains an insider tip that still leaves some questions unanswered. CEO Fazari has been optimistic recently, however, and sees RYU making the transition to global prominence. The Company's goal is to catch up with brands like Lululemon, Roots and Goose of Canada.
BYD and the doubts about sustainability
When it comes to sustainably positioned companies, manufacturers of electric cars are often mentioned first. But doubts about how sustainable electromobility is arises time and again. The reason: Many critical raw materials used in electric vehicles and their batteries are extracted in a way that is anything but sustainable. BYD, in particular, as a Chinese manufacturer, is likely to have one or two nasty surprises in its supply chains for sustainably-minded investors.
However, those who ignore this issue will find BYD to be a dynamic trend stock. Over the course of one year, the stock has gained a whopping 475%. During the past few trading days alone, BYD managed a return of more than 25%. The share climbs in the slipstream of titles such as Tesla or NIO, which are rising almost unchecked these days.
But every bull market comes to an end. The already ambitious valuations of electric car stocks, coupled with recent reports of overloaded power grids caused by charging stations, and doubts about many business models' true sustainability, should be reason for caution. Sustainably positioned companies whose potential has not yet been reflected in the share price could be the better choice for investors in the long term.