The discounts also reach the stock market

If something stands out these days in the windows of the main stores in any city you walk through, it is the signs like “Discounts of 40%, 50%, 70%”, “Last opportunities” or “Incredible prices”.

These are the January sales.

No one, however, comes across such labels or advertisements regarding investment funds, stocks or ETFs or exchange-traded funds on the windows or entrance doors of bank offices, securities companies or wealth management companies.

But, according to the experts consulted, in these first days of 2024, they could well be placed.

In the words of Andrés Allende, manager of the A&G DIP Value Catalyst fund, “today, the menu in the stock markets is much broader than normal.

The market has left great things within reach.”

For Álvaro Antón Luna, head of Aberdeen Standard Investments for Iberia, “there really are large companies whose prices have suffered a lot that are at least relatively cheap.

“Very especially outside of the fantastic seven of technology: Apple, Microsoft, Nvidia, Amazon, Meta (Facebook), Tesla and Alphabet (Google).”

In the opinion of 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 punishment;

They may simply benefit from a rotation process.

In 2024 we will see interest rate cuts by central banks, and rate cuts have a much broader effect and affect the market as a whole, not just technology.”

As Admiral Markets explains, a stock is by definition “cheap” or “undervalued” when its price is lower than its fair value, that is, it is below the average of its sector or similar companies.

The fundamental assumption about them is that “the stock price will correct itself over time and get closer to the real price.”

Finding these values ​​becomes more complicated.

From here some clues are offered.

Sébastien Senegas, head of Edmond de Rothschild AM for Spain, considers that the health sector — “although it is not monolithic” — presents good prospects due to the punishment received in the last year and the abundant proliferation of new patents and drugs, especially linked to obesity and cancer.

In his opinion, biotechnology companies, which due to financing issues have been severely penalized, could now experience better stock market times.

In his opinion, we must not lose sight of the opportunities in the luxury sector (“with usual double-digit returns”) and in small and medium-sized European companies that, in many cases, are trading at discounts of around 20%. %.

Senegas advises resorting to investment funds “making the selection by analyzing the returns obtained in the last three to five years.”

Technology

For Víctor Alvargonzález, the technology sector has greatly benefited in 2023 because the market has realized the importance that the arrival of generative artificial intelligence will have.

Logically, it has identified the

software

and

hardware

manufacturers of this new phase of the digital revolution as the first beneficiaries.

This will continue throughout the year and especially in the first quarter.

But, in his opinion, “later on the market could begin to look at other sectors that can take advantage of this new technology.

Among them are banking and/or insurance, that is, sectors that could see their productivity increased thanks to the implementation of generative AI.”

From his point of view, to take advantage of this possible trend, “it is not necessary to get complicated with specific values;

it is much easier to go to sectors.

And for sector investment, there is nothing like ETFs, which are investment funds that allow you to target sectors and subsectors with much more precision.”

The only problem posed by these instruments, which are cheaper and faster to operate, is, as he points out, that “in Spain a very important fiscal entry barrier has been placed on them.

While funds do not pay by passing money from one to another;

ETFs, yes,” he says.

Andrés Allende believes that “cheap” companies can be found in the pharmaceutical, renewable and technology sectors (outside the big seven).

Regarding this last segment, he refers 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 begun to rebound, they are still not even close to its real valuation.”

And he also influences several European companies such as STMicroelectronics and Infineon Technologies AG.

By area, it rules out emerging markets due to risk and lack of confidence in their future as they are too linked to China, although it recognizes that in the Asian country some companies are doing very well: among them, Tencent, with a discount of around 30% over its price from a year ago.

The list of companies that currently have attractive valuations for Álvaro Antón is quite extensive.

In various sectors.

Among them, ASLM Holding, Iberdrola, Novo Nordisk, LVMH, L'Oréal, Banco Santander... But if there is one thing he believes that “there is a stock market future” it is in emerging markets.

For several reasons: the first is that “the supremacy experienced in 2023 by the so-called fantastic seven and, in general, the American technology sector, may weaken in the coming months”;

The second is that countries like Mexico, Brazil, India, Korea or Vietnam “are going to become the main production centers in the world.”

Aware, however, of the risk that it may pose for an investor to opt directly for emerging markets, he focuses his recommendation on European funds specialized in companies with exposure to “those emerging markets, in which they obtain very significant percentages of their results.” .

Finally, it should be noted that Admiral Markets, after clarifying the importance of geopolitical conflicts and the possible evolution of interest rates, considers 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, which currently has the largest fleet in the world with more than 100 vessels in 10 line brands. cruise ships.

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