Already immersed in the last quarter of the year, the current renewal of the Eco10 portfolio – the index of quality ideas produced by elEconomista with the collaboration of 50 analysis firms and calculated by Stoxx – yields two main conclusions.
The first, that the cycle begins to show symptoms of exhaustion after the accumulated revaluations since Pfizer and Moderna communicated to the market the efficacy of their respective vaccines back in November of last year and inoculating certain doses of optimism about the expected recovery for 2021.
The second, that the reading that has been made of the message of Jerome Powell, president of the Fed, in Jackson Hole the previous week, to decouple the beginning of the withdrawal of stimuli from future increases in interest rates already has its echo in Europe and has begun to permeate with investors. Experts already contemplate that the European Central Bank (ECB) announce the tapering in December given the good performance of the economy and inflation, making it clear that although the asset purchase programs lose intensity, the rise in the price of money could still be very far, with what this means for the banking sector.
In the review where a retraction of the cycle is appreciated in a scenario of ‘tapering’ without a rise in interest rates in the short term
In this way, the fifty analysts and managers who build the indicator have decided to start the last quarter of the year -the current composition is valid for the months of September, October and November- with the return of Inditex and Cellnex Telecom three months later. , Almirall, who was fired in December last year, and the entry for the first time in the history of the Eco10 of a company outside the Ibex: Global Dominion .
These four companies will fill the vacancies of CIE Automotive and Acerinox, whose departure reflects that the expected recovery will be less powerful than expected, and of BBVA and CaixaBank in the current context in which the rate hike will be later than expected. The changes will be effective on September 17 at the close of session .
Thus, the current composition of the selective is formed – following the weighting, from more to less, given by the experts – by the following ten companies: Repsol, Inditex, Grifols, ArcelorMittal, Amadeus, IAG, Almirall, Cellnex Telecom, Banco Santander and Global Dominion . However, within the index its weight is balanced, with 10% for each of them.
The new portfolio has an upward potential of 21% on average for the next few months
The entry of Dominion has been resolved after a five-fold tie with Acciona, CIE Automotive, Iberdrola and Telefónica (see support), with a weighting of 2.76% – despite the fact that within the index its weight is the same for the ten stocks -. Global Dominion has the best recommendation of the five companies, with a buy recommendation, as does CIE and Acciona. It also has a potential of 24%, similar to that of its former parent, CIE, and above Acciona’s 13.5%. The energy company has been on the verge of returning to Eco10 thanks to the return of the investor for sustainable energies, of which it has not been part for a decade.
The new portfolio has an average upward potential of 23.5% for the next 12 months, according to the consensus collected by FactSet, and seven of the ten members show a buy recommendation. The exceptions are Repsol, Inditex and Amadeus, which receive a keep.
For the year as a whole, the Eco10 beat the Ibex by 1.3 profitability points, which rose 10% in the same period. Likewise, the orange index has obtained a better performance since its creation. From June 16, 2006 to the last day of November, it is 49 points ahead of it, with a return of 130% compared to 81% for the Spanish index in the same period.
Dominion, first ‘no Ibex’
Global Dominion has become the first company outside the Ibex 35 to be part of the Eco10 in its 15-year history. She is not a stranger. It arrived at the national park one April five years ago by the hand of CIE. It was its parent company, but it decided to leave the company by distributing a dividend in kind among its shareholders who also became investors in its former technology subsidiary. Account, everything is said in passing, with one of the best purchase recommendations of the entire Continuum and is considered one of the fetish values of value managers .
What do you like about her? Your ability to meet your goals and get ahead of them. The company expects to close the year with double-digit sales growth, an increase in ebitda of over 10% and an increase in net profit of over 25% compared to 2019. Its strategic plan for 2023 aims to reach 64 million euros -on the 39 of 2019-. The consensus already stands at 69 million. Dominion has three main business legs: technology, industry and energy, and smarthouse- centric customer relations (B2C) . It also has 100 million euros of net cash.
Since 2015, it is the fourth most profitable IPO , with earnings of 64%, behind Cellnex, Aena and Solarpack.
Almirall also returns , which debuted in the index in September last year, coinciding with its jump to the Ibex 35, and came out in March. The pharmaceutical company signs profits of 33% in 2021, despite the fact that the impact of the provisions of 103 million euros made to assume the loss of value of its investments in the US has not pleased analysts, who have lowered their profit forecasts by almost 70 million, going from 80 million to just over 12 million.
From Caja de Ingenieros downplay this deterioration, and once again bet on Almirall for another quarter. “We have incorporated it into the portfolio for Eco10 on several occasions, we believe that it can provide stability in the coming months. Its defensive profile should work in an environment in which we will continue to see volatility in terms of macro data and central bank guidelines, specifically the Fed “, explains Toni Cárdenas, manager of the company.
“If the situation of the pandemic does not worsen and it affects with more confinements, it should have a good behavior, if it worsens, it will suffer from fewer medical prescriptions due to mobility problems and hospitalizations,” adds the expert.
The return of Inditex and Cellnex
The other two novelties in the index are featured by Inditex and Cellnex, two regulars at Eco10 who have only waited on the bench for a quarter. In fact, textile, which adds 14% in the year, has jumped directly to second position only behind Repsol . As for the telecommunications tower company, it advanced 26.5% in the year. The latest boost that has catapulted it to hit levels never seen before at 61.08 euros per share on August 28. “At historical highs, the telecommunications industry is experiencing a moment of tailwinds before the massive adaptation of 5G technology. The Spanish is a leader in Europe and only behind American Towers, it is the second in the world,” they justify from XTB.
Seven of the ten securities receive a purchase sign, while Inditex, Repsol and Amadeus are a keep
In fact, the latest arreón on the stock market has come from the hand of its semi-annual accounts, with an EBITDA of 804 million euros, 52% more than the same period last year. Although “the key has been in the margin, which improves thanks to stable comparable costs due to efficiencies and the change in perimeter,” they explain from Renta 4.
Among the companies that repeat another quarter, the continuity of Amadeus stands out considering that it has just been expelled from the EuroStoxx 50 . There is no reason that the Eco10, unlike the European indicator, is not built based on capitalization, but rather its purpose is to find quality investment ideas.
“Amadeus is the leading company, with nearly 50% market share in airline reservation management and airline management software. It has an impeccable record of long-term growth, close to double digits, both in sales as in profits, which has been truncated by Covid, when sales fell by 60%, although despite this it had a positive ebitda. We expect that in 2023 it will recover the sales of 2019, but with better margins due to the reduction of costs and that, from then on, it will continue to grow about 10% annually “, says Antonio Aspas, partner and manager of Buy & Hold.
Repsol returns to the leadership of the Eco10 index two years later
Repsol returns to the leadership of the Eco10 index two years later
Santander has also continued since March , which is left alone in the face of danger as the only representative of the banking sector. The Santander firm, which receives a purchase advice from analysts, accumulates a revaluation of 22% and has managed to double its value on the stock market from the minimum that it marked at 1.46 in September last year. In addition, it has room to advance 20% more to 3.75 euros per share.
ArcelorMittal , Grifols and IAG complete the review with very different perspectives on the trading floor. The Luxembourg steelmaker has risen close to 50% in the last eight months, the Anglo-Spanish airline barely rebounded by 2% and the manufacturer of blood products shows a negative balance of 12.5% A setback that has revealed an upward potential of 44% for IAG and 33% for Grifols for the next twelve months.
The ‘bench’ of Eco10
Five stocks have been tied for weighting in this latest revision that has finally been settled in favor of Global Dominion, which appears in a greater number of portfolios. In this way, CIE Automotive, Acciona, Iberdrola and Telefónica remain heating up the bench. For the manufacturer of automotive components, this percentage represents the departure of the orange index of which it was part since the March review.
In the case of Acciona, which has also aroused the interest of experts in 2021 due to the successful IPO of its renewables division, entering the Eco10 would mean returning for the first time since 2010. And in terms of electricity and the ‘teleco’, which has been part of the Eco10 on numerous occasions, this position means improving by thirteen and five places, respectively, compared to the previous review.