Nowadays, if one thing stands out in the windows of the main stores in a city that you walk through, it is signs like “40%, 50%, 70% off,” “Last Opportunities,” or “Incredible Prices.” These are the January sales. However, no one will come across such inscriptions or advertisements for mutual funds, stocks or ETFs or exchange-traded funds on the windows or entrance doors of bank branches, securities firms or asset management companies. However, according to the experts interviewed, they could be placed as early as the first days of 2024.
In the words of Andrés Allende, manager of the A&G DIP Value Catalyst fund: “Today the offer on the stock markets is much broader than normal. The market has put great things within reach.” For Álvaro Antón Luna, head of Aberdeen Standard Investments for Iberia, “there are actually large companies whose prices have suffered greatly and who are at least relatively cheap.” “Especially outside of the fantastic seven of technology: Apple, Microsoft, Nvidia, Amazon, Meta (Facebook), Tesla and Alphabet ( Google).” According to Víctor Alvargonzález, strategy director of the independent financial advisory firm Nextep Finance, “there are almost always discounted values and sectors.” And it is not necessary that they have received a penalty; You can simply benefit from a rotation process. In 2024 we will see interest rate cuts by central banks, and interest rate cuts have a much broader impact, affecting the market as a whole, not just technology.”
As Admiral Markets explains, a stock is by definition “cheap” or “undervalued” if its price is below its fair value, i.e. below the average for its industry or similar companies. The basic assumption is that “the stock price corrects itself over time and converges towards the real price.” Finding these values becomes more complicated. From here some pointers are given.
Sébastien Senegas, head of Edmond de Rothschild AM for Spain, believes that the health sector – “although it is not monolithic” – offers good prospects due to the penalties received last year and the proliferation of new patents and medicines. particularly linked to obesity and cancer. In his opinion, biotechnology companies that have been severely punished due to financing problems could now experience better trading times. In his opinion, we must not lose sight of the opportunities in the luxury sector (“typically with double-digit returns”) and in small and medium-sized European companies, which often trade at discounts of around 20%. %. Senegas recommends choosing investment funds “based on the returns achieved over the last three to five years”.
technology
For Víctor Alvargonzález, the technology sector has benefited greatly in 2023 as the market has recognized the importance that the adoption of generative artificial intelligence will have. Logically, it has identified the software and hardware manufacturers as the first beneficiaries of this new phase of the digital revolution. This will continue throughout the year and especially in the first quarter. But in his opinion, “later on, the market could start to look for other sectors that can benefit from this new technology. These include banking and/or insurance, industries whose productivity could be increased through the use of generative AI.”
In his view, to benefit from this possible trend, “it is not necessary to complicate yourself with specific values; It's much easier to get to sectors. And for sector investing, there is nothing better than ETFs, which are mutual funds that allow you to target sectors and sub-sectors with much more precision.” The only problem with these instruments, which are cheaper and quicker to use, is, as he points out, that they “a very important fiscal barrier to entry has been imposed in Spain.” While funds are not paid by passing money from one to another; ETFs, yes,” he says.
Andrés Allende believes that “cheap” companies can be found in pharmaceuticals, renewable energy and technology (outside the big seven). Regarding this last segment, he points to the so-called memory companies such as Samsung Electronics, Micron Technology or SK Hynix, which “have experienced one of their worst times in years and although they have started to recover, they are still not balanced.” close to its actual value.” And it also affects several European companies such as STMicroelectronics and Infineon Technologies AG. By region, emerging markets are excluded due to risks and a lack of confidence in their future as they are too tied to China. However, it is acknowledged that some companies are doing very well in the Asian country: including Tencent, at a discount of around 30% from its price a year ago.
The list of companies that currently have attractive valuations for Álvaro Antón is quite extensive. In different industries. These include ASLM Holding, Iberdrola, Novo Nordisk, LVMH, L'Oréal, Banco Santander… But if there is one thing he believes “there is a future for the stock market” it is in emerging markets. For several reasons: the first is that “the dominance that the so-called Fantastic Seven and, in general, the American technology sector experienced in 2023 may weaken in the coming months”; Secondly, countries such as Mexico, Brazil, India, Korea and Vietnam will “become the most important manufacturing centers in the world”. However, she is aware of the risk that choosing emerging markets directly can bring to an investor and focuses her recommendation on European funds that specialize in companies with exposure to “the emerging markets where they have a very high share of their results”.
Finally, it should be noted that, having clarified the importance of geopolitical conflicts and the possible evolution of interest rates, Admiral Markets believes that for a long-term investor “cheap stocks” would be, for example, Boeing, the American aerospace giant; General Motors, the American multinational that houses automobile brands such as Chevrolet, Buick, GMC or Cadillac, and Carnival, the British-American cruise operator that currently has the largest fleet in the world with more than 100 ships in 10 liner brands. Cruise ships.
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