Doubts return to the Stock Market: what can be bought now

On Thursday, a new alert focus was triggered: Silicon Valley Bank (SVB) shares plummeted 60% after failing in their attempt to raise capital, triggering sales in the US banking sector. The fuse spread on Friday to Europe. The Ibex banks, the main architects of the good performance of the Spanish index in 2023, lost between 5.11% of Sabadell and 1.8% of CaixaBank

With the fuel for the earnings season already exhausted and the conviction that interest rates have not peaked in Europe and the US, investor motivation had been languishing for days now.

As a result, the slowdown in stock market indicators is widespread and the Ibex is trading 2.38% below its closing annual maximum, the 9,511 points it reached on March 6. Beyond the supervening tension, there is no shortage of arguments for doubts to prevail on the parquets. Economic uncertainty remains high, geopolitical risks remain in the background and large investors are once again focusing on value stocks.

Experts acknowledge that making investment decisions in this scenario is not easy, but they maintain that there are always ideas to trust. Defensive bets now dominate.

Iberdrola is one of the options chosen by Diego Morín, an analyst at IG Markets. "While a domino effect could drag down any stock, utilities can do well at more complex times for cyclicals," he says. He also points to Naturgy or Red Eléctrica, despite the punishment received in recent sessions.

In XTB they lean towards Mapfre. "The increase in claims, the strong impact of inflation in Turkey, Argentina or Venezuela and the fall in value of its debt portfolio put an end to what was being an excellent year in attracting business in 2022. It is to be expected that In the coming quarters, inflationary economies will gradually control the rise in prices and the bond portfolio will not suffer as much," explains Joaquín Robles, an analyst at the firm. They predict a significant recovery of the insurer's shares this year and highlight the dividend yield close to 8% with which they are listed.

Juan J. Fernández-Figares, director of analysis at Link Securities, likes Logista because "it presents reasonable stock market multipliers at current prices, generates a lot of free cash and offers a high dividend yield of more than 7%."

Cellnex and Grifols are two good opportunities at current prices, according to Toni Cárdenas, manager of Caja Ingenieros. In the first case, it justifies it due to its great undervaluation, since it is listed at 15 times the value of the company/ebitda compared to 21 times for its counterparts, and because the company has set its objective to reduce leverage, gain efficiency and allocate capital with more options than acquisitions. Of the blood products group, it stands out that it has begun an improvement in margins, the recovery of sales and has committed to reducing the debt up to 3.5 times the ebitda by 2025. "Possible divestments in the short term would confirm this trend and give visibility" , assures.

Among the Spanish listed companies that are not part of the Ibex, Fernández-Figares would bet on Viscofan, which operates in a sector such as food that is considered defensive due to the inelasticity of demand. "The company generates a lot of free cash and presents good growth expectations for its results. In addition, it has a very healthy balance sheet with little net debt," he argues. Robles puts Prosegur Cash in the spotlight, whose business has normalized, leaving behind the hit of the Covid, without the price reflecting it. "The higher inflation, the greater the circulation of money and, therefore, the greater demand for the services offered by Prosegur Cash. His decision to increase shareholder remuneration in 2023 is interesting to us, but what most strikes us is his intention to continue growing both organically and inorganically by buying competitors that, as in the entire industry, continue to trade at attractive valuations," he says.

The largest company by capitalization in the euro zone, LVMH, is among XTB's favourites. It is being helped by sustained growth: luxury goods sales are forecast to rise 60% in 2030 as wealthy consumers from India, Mexico, South Korea and Southeast Asia join. It indicates the loyalty of the demand, which contributes to a greater stabilization in sales. This type of company works with profit margins well above the industry average, which allows them to better withstand periods of inflation, and they have the ability to set prices.

The Dutch retail distribution company Ahold Delhaize, which obtains 64% of its sales in the US, is an interesting European option according to Link Securities, due to its defensive profile. In the food and beverage sector, Caja Ingenieros is looking at Diageo, which has received excessive punishment after the results. "But it is a defensive company that trades at good multiples based on its historical evolution," says Cárdenas. Another attractive European alternative for this firm is Deutsche Boerse, due to the fact that it behaves better than the market in scenarios of volatility and uncertainty and "its ability to capture value at times of interest rate rises through fixed income and yields of account balances. Morín would look for stability among utilities such as the French Engie and the German RWE and E.ON.

In the US, Fernández-Figares is committed to Valero, a refinery specializing in ecological fuels, which can take advantage of the lack of diesel in Western markets and with high visibility in results.

Warner Bros. Discovery represents another good opportunity, in Robles' opinion. "It aspires to become the third streaming platform after Netflix and Disney and one of the competitive advantages is the development of its video game division. The biggest threat is its $43 billion debt."