Envictus (SGX: BQD) shares are down 7% on the day. BQD shares thus proving that basic point that no share price movement - or direction - lasts forever. We looked at Envictus back in June and the shares are up nicely since then. In fact, they’re up 95% on the past 6 months which is a substantial rerating in anyone’s book.
As we said about Envictus: “There's little to nothing sexy about this, it's a plain old boring business that makes stuff people want to buy. There's no AI here, no vast addressable market, just those everyday purchases of, well, of condensed milk and then other food and beverage products.
We'd not, therefore, expect any grand changes in prospects at any time. If there's going to be a change in the business then it's going to come from that hard grind of just doing things a little bit better month by month and quarter by quarter. The actual evaporated milk sector does seem to be expanding. This would be a surprise to Westerners but the relationship with milk products out in the Far East is different - it's also a place that is rapidly getting richer, allowing the trading up to such products. “
In that lies an important investing story for us.
Envictus share price from Google Finance
No, of course we don’t know what the future holds. It’s also true there’s that line about history repeating, first as tragedy then as farce. Or even that history doesn’t repeat but it does echo. It’s that last that is important for us here.
So, what happened - which products really made it - as Europe and North American got richer last century? Some are obvious enough - vacuum cleaners and microwaves perhaps. Others are perhaps less obvious - the rise of packaged foodstuffs perhaps. Canned soups - canned milk even. Things that either used to be prepared at home, or bought in fresh. As people became richer then cupboards filled up with these prepared foodstuffs. Diets became richer as people got richer, yes - meat consumption per head soared. But so did consumption of all sorts of things that we now consider basics but back then were luxuries to the poor.
Yes, yes, we know that Singapore is richer than the UK now. But Indonesia isn’t - and so we can expect those hundreds of millions to, as they become richer, go through that same upgrade to their diets. True, this is looking at things at a fairly large scale, there’s not much detail here. But it is still true. The prediction for this century is that the entire world becomes as rich as “the west” is now. Therefore we should expect consumption patterns to converge on where they are in the west now.
That’s not a roaring conformation that Envictus is going to be the market winner. But the underlying idea that canned and condensed milk is going to see a consumption rise is pretty much built into our basic economic view of the next few decades. Which is a useful insight. What other items that we think of as boring staples are, in fact, going to be those luxury goods of the newly rich in the rest of the world?
