The large caps category as a whole is being
overvalued. That does not mean that there are no investment opportunities
Especially in certain sectors there are interesting stocks to find, which can
be bought at attractive discounts.
based on the ‘Large Cap Global Core Pick
List’, written by Morningstar.
Large cap stocks are stocks with a large market capitalization.
For a monthly stock list, Morningstar uses their analysts to track and list
attractive global large caps, which have the characteristics of a ‘Narrow’ or ‘Wide
Moat’ which are companies with a competitive advantage in the long run.
Furthermore, shares only make it to the list when there is an undervaluation.
The main focus on the list are attractive and undervalued large caps from the
US and widely traded stocks which are available on the American market.
Bargains in health sector
The list as a whole trades at a substantial discount to the market. Average
valuation of 89 percent of the fair values as calculated by Morningstar. This
is mainly due to some sectors scoring well-below their fair value. The health sector
has the biggest discounts, with a score of 80 percent compared to the fair
In the consumer goods sector, Ralph
Lauren and Mattel take the
spotlight, instead of Twenty-First Century Fox and Viacom, which were
previously regarded as top-quality.
"Mattel gets a Narrow Moat rating
because the licensing agreements with big names in the entertainment industry.
It also has a large market share. Through this strong position Mattel can
easily enter into new licensing alliances. The company has the broadest reach
and deep pockets in order to put in a lot of marketing money. For beginners, it
is difficult to enter this market, "says Jaime Katz, an analyst at
Cost benefits Wal-Mart
In the consumer staples sector,
Imperial Brands, Ambev and Estee Lauder went down in popularity while Wal-Mart, Anheuser-Busch InBev and Heineken took their place.
Analyst Erin Lash about Wal-Mart: "It
is the largest retailer in the world and get a wide moat rating because of the
enormous scale that purchasing power and cost benefits entails a result can
handle the low retail prices and in addition, the logistics is organized very
efficiently. which further contributes to the favorable cost. "
Lash adds that Wal-Mart is an attractive partner for suppliers because of the
sheer volume, which makes it possible to put a great amount of products
directly into the market in a way unmatched by any other retailer.
In the health sector, Bayer only need to clear the field, which is an advantage
for Sanofi. Sanofi is currently more
attractive and appreciate, according to analyst Damien Conover.
"The product range includes multiple
leading drugs can not just imitate the competition, even if the patent
expires." One such drug is insulin Lantusm means that, according to
Conover is clearly better than other insulins. "A generic producer can
there not just here in front put a competitive product." In addition,
Sanofi has plenty of other strong products in the range, says the analyst.
A lot of changes are also happening in different sectors. This month Arconic and Canadian Pacific
Railway are disappearing in the industrial sector. Raytheon and Royal Philips will
be taking over their places.
In the information technology sector Skyworks
Solutions disappears because the share price of the company has almost
reached fair value. Qualcomm replaces
them on the list.
In the real estate industry Well Tower is almost at fair value. Therefore the
share gives way to Vornado Realty Trust.
In the utilities sector FirstEnergy will
coming on the list this month, at the expense of Duke Energy.
American or European shares?
before, the lists of undervalued discounted shares are mostly based on American
shares. However, to give you a good overview of the European shares, these are
reasons to also look into Europe.
A good investment portfolio is well
diversified in terms of sectors and regions. But due to the US stock markets
hitting record highs, it may also be worthwhile to focus on European companies.
European stocks are doing fine in 2017. IShares MSCI Germany ETF has gained
about 12% since December 1, while the Vanguard ETF Europe, in the same period,
gained approximately 9%. Of course, past performance is no guarantee of future
results, but the recent strength in terms earnings does show that the increase
Profit and sales growth
A recent note from J.P. Morgan showed that average earnings growth of companies
in the Stoxx Europe 600 is 10%, and is positive in nine out of the ten sectors.
The sales are surprisingly positive, according to the analysts.
The S&P 500 recently reached the highest price-earnings ratio since 2004.
European stocks were left for dead after the European Brexit, and in junethe
gap between the S&P 500 and Stoxx Europe 600 was the highest since 2011.
Long-term gains and diversification
Eventhough the European market has been relatively volatile since the Brexit
and with other countries second guessing the Eurozone, it is always smart to
diversify your portfolio in terms of regions. It is unlikely that the Eurozone
will fall apart in the coming months and if you share the same confidents, you
could use Europeans stocks as a hedge if the portfolio mainly consists of US
mega caps. The reason for this is that the US market has also been relatively
volatile and very uncertain, with potential regulations coming up from
3 Mar 2017 4:38 PM | Anonymous