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Today's comments follow our return from Baader's Equity Investment Conference. Most of the top European firms were present at the conference and we had a chance to ask questions and compare analysis. As a general observation the mood is cautiously optimistic on equity performance going forward. Most of the companies present are on target as regards earnings for 2013 and many are betting on an improvement in 2014. This scenario is somewhat dampened by the knowledge that the road ahead is still foggy.
The way I see it is that economic improvements to date are not enough to repair past errors and generate long term prosperity. Political impasse and political motivation have created a bureaucratic barrier that is limiting decisive action. Having said that, corporates have proven to be much better than politicians at managing, or minding, their business.
European corporates in particular are cash rich. Probably this results from the fact that a company's CEO has an interest is keeping the company safe and efficient. A prime minister has an interest to be re-elected and thus wasting resources to guarantee votes is… tempting.
The end result that is observable is that we have failing governments but rock solid corporates. Our bet is on these corporates. We believe that Allianz, BMW, Hugo Boss, Lufthansa etc. will survive volatility in corrections as they already have in the past 5 years. Just check out their trend on Google Finance. Thus for the short term investor, this period is golden, but also a minefield, and it is not what we do. However, for the long term value investor, we are pointing out precious names that add value to a balanced portfolio.
Calamatta Cuschieri customers can access individual reports on companies. Updates, including our impressions from our meeting with the companies will be available shortly.
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