France - Top picks H1 2014 - Six high conviction ideas for H1 2014
https://www.research.hsbc.com/R/20/gI7ZHDgh9EVf
* In a context of low interest rates and slow economic growth, we select some high yield stocks with sound earnings prospects such as Eutelsat, Rubis and Suez Environnement
* We prefer value to growth, and we have selected Rallye and Wendel on this thematic
* We also like companies which we think will able to improve margins through cost control and/or pricing power, such as Tarkett
Economic growth is likely to be weak again in H1 2014 in France, given budget deficits, and concerns about the effectiveness of the economic policies adopted to resolve budget problems and debt burdens, especially the fiscal tightening. The political agenda will be back loaded to H1 (municipal election in March, European election in May).
Since the onset of the financial crisis, the investment landscape has been dominated by macro factors. We believe that stock or sector specifics are set to take on an increasing role in driving stock returns in 2014. Stock picking is coming back on the agenda.
We have applied our European equity strategists' sector views to the French Mid cap space. 1/ We believe that value is set to outperform growth given current valuations (eg Rallye or Wendel's whose discount is expected to get lower), 2/ one of the key element of our positive stance on European equities is the potential for earnings growth and margin improvement coming from pricing power, higher utilisation rate of capacity or lower production cost (eg Tarkett), 3/ capital discipline and high dividend yield is another important theme, especially in a low interest rate environment. We have selected Eutelsat, Rubis and Suez Environnement, not only for their dividend yield, but also for their ability to have sustained / increasing earnings.
Finally, we have incorporated in our selection a preference for companies exposed to developing markets. Rallye, Rubis, Suez, Environnement, Tarkett and Wendel, in different ways, are exposed to this thematic.
https://www.research.hsbc.com/R/20/gI7ZHDgh9EVf
* In a context of low interest rates and slow economic growth, we select some high yield stocks with sound earnings prospects such as Eutelsat, Rubis and Suez Environnement
* We prefer value to growth, and we have selected Rallye and Wendel on this thematic
* We also like companies which we think will able to improve margins through cost control and/or pricing power, such as Tarkett
Economic growth is likely to be weak again in H1 2014 in France, given budget deficits, and concerns about the effectiveness of the economic policies adopted to resolve budget problems and debt burdens, especially the fiscal tightening. The political agenda will be back loaded to H1 (municipal election in March, European election in May).
Since the onset of the financial crisis, the investment landscape has been dominated by macro factors. We believe that stock or sector specifics are set to take on an increasing role in driving stock returns in 2014. Stock picking is coming back on the agenda.
We have applied our European equity strategists' sector views to the French Mid cap space. 1/ We believe that value is set to outperform growth given current valuations (eg Rallye or Wendel's whose discount is expected to get lower), 2/ one of the key element of our positive stance on European equities is the potential for earnings growth and margin improvement coming from pricing power, higher utilisation rate of capacity or lower production cost (eg Tarkett), 3/ capital discipline and high dividend yield is another important theme, especially in a low interest rate environment. We have selected Eutelsat, Rubis and Suez Environnement, not only for their dividend yield, but also for their ability to have sustained / increasing earnings.
Finally, we have incorporated in our selection a preference for companies exposed to developing markets. Rallye, Rubis, Suez, Environnement, Tarkett and Wendel, in different ways, are exposed to this thematic.