About: Brambles Limited is a global support services group which provides pallet and plastic container pooling services and information management services. The company focuses on the outsourced management of pallets, crates and containers.

Why it’s in the portfolio: Brambles is one of the largest industrial firms in Australia with a diverse and economically resilient business model. The company operates in over 60 countries and with 90% of its operations in North America and Western Europe provides significant exposure to overseas markets and portfolio diversification.

Fundamentals: BXB currently trades on a price-to-earnings ratio of around 20x forward earnings, and a price-to-book ratio of 5x. BXB currently offers around a 4% gross dividend yield, and a dividend payout ratio of around 65%. At 32%, BXB’s level of debt relative to assets is considered to be mid-range.

What could go wrong: If it turns out that the weakness in the US that led to the profit downgrade was a harbinger of problems in the US business or a canary in the global economic coal mine then we might see further weakness. Furthermore, because Brambles needs to replace about 10% of its pallets each year, it is particularly vulnerable to rising raw material costs. Lumber prices can be volatile and depend on factors such as wildfires. The Trump administration has discussed the possibility of imposing tariffs on Canadian lumber, which would hurt BXB’s cash flow.