GVC Gaesco has decided to add Técnicas Reunidas and Amadeus to its portfolio of preferred Spanish stocks, while it has opted to remove Naturgy and CAF as their relative short-term potential has been reduced after their "very good performance" during the last month.
"Técnicas Reunidas has opened up an entry opportunity and Amadeus has been penalized too much in our opinion," explained the firm in the review of its list of standout stocks in Spain and Europe, when justifying these changes in its strategy.
At the same time, the entity notes that it does not rule out both Naturgy and CAF seeing their valuations and forecasts revised upward again, supported by the "good context in the energy sector and in rail transport" that remains in force.
Adjustments in GVC Gaesco's European selection
As for the European portfolio, GVC Gaesco has decided to add the French Elis and remove two Italian companies. First, the pharmaceutical company Recordati leaves the list after the capital increase process of the takeover bid and its delisting from the Stock Exchange have been completed.
In addition, the entity has removed the asset manager Azimut and replaced it with another Italian company in the same field, FinecoBank, which they consider "more attractive" at current prices.
Markets marked by rotation and politics
In its general analysis, GVC Gaesco points out that the current environment has made it possible to carry out portfolio rotations in a framework characterized by "the slight taking of profits" seen in October in most stock markets, as well as by high volatility within sectors and disparate performance among industries.
"The truth is that such a contained decline after the strong rise accumulated in recent months is a sign of strength in the face of the negative factors that have occurred," the entity emphasizes when assessing the tone of the markets.
Among those factors, it cites the "lack of progress in the resolution of the Middle East conflict", which has driven the price of gas to highs on the eve of winter, "the situation of French debt" and "the wait for the 'mid-term' elections in the United States, which may produce a paralysis of decisions".
Upon delving into the rise in the yields of French sovereign debt, GVC Gaesco points out that the cause is "mainly internal" and that, in view of the current spreads versus Germany, "an intervention by the European Central Bank (ECB) in the debt markets does not seem imminent, but it may cause it to put monetary policy on hold in October and not raise rates".
The firm also maintains that investors' focus has shifted "from inflation to politics" because of the effect that the latter may have on fiscal discipline in the medium term.
In this sense, and with regard to the United States, the firm anticipates that the market reaction "may be positive if there is some political paralysis" as it could translate into lower public spending.
"Historically, after the midterm elections the stock market has performed well," the firm recalls when analyzing the usual pattern after these elections.
On the monetary policy front, GVC Gaesco foresees "an upward move" in interest rates before the end of the year both by the ECB and by the US Federal Reserve (Fed, by its acronym in English).