Saturday , July 31 2021

Euro on Sunday Name: 10x Stability – Top stocks for safe return in difficult times



by K. Schachinger and S. Bauer, Euro am Sonntag

This is a little unstable. The losses of early October have deeply upset many investors. In early November, clubs in New York and Frankfurt started a counter-movement, but it is still unclear where the trip will begin. Technologies and chip stocks were the most affected by the current correction. After all, these titles have also brought investors more than average share price rises.

Not only that. Companies in the technology sector have so far produced particularly high profits in the most important indices. But there are stronger signs that this is changing. After all, the business models of many companies in the technology sector are cyclically dependent – an excellent example of this is semiconductor manufacturing. These stocks are particularly under pressure as the risks to global economic growth are rising.

Especially the American president Donald Trump the busy trade dispute with China has lowered the economic outlook. Hank Paulson, former head of the US Goldman Sachs Bank and former US Treasury Secretary, warns of a "Iron Curtain" that America is trying to "tighten all areas of Chinese economic relations." The economy in the United States is still excellent. However, the dollar is also increasing the negative foreign exchange effects of foreign trade, and rising costs due to the tariff will continue to hamper sales growth and profits, especially in economically sensitive sectors such as the industrial and technology sectors.

In the current year the companies of the broader US S & P 500 index increased its profit by an average of 11%. For 2019 experts expect only a four percent increase in profit here.

The economy in Europe has not been so successful lately. This is reflected, for example, in the development of DAX. Several companies were disappointed in the three-month season (see page 22). The turbulence around Brexit and the budget dispute with Italy create additional uncertainty (see page 12).

Investors rely on stability

In turbulent times, investors are looking for shares that promise stability. The editors of uro am sonntag are therefore looking for shares that promise price stability and potential under changed conditions. The two main aspects of our search: market position and economic strength. We wanted to find companies that have developed an exceptional position in their business, which is also difficult to attack because of the high level of competitiveness. This position, on the other hand, regularly provides our desired candidates with high cash flows.

Features such as low debt, high cash flow and significant cash holdings are becoming more and more valuable at times of rising interest rates. The full fund protects against crises because it allows companies to invest even in economically more difficult times. If things get tough, the chances are that they will be able to conquer competitors competitively. And: These companies can continue to afford to buy shares and pay dividends.

With the equivalent of nearly 239 billion euros of cash reserves and approximately 57 billion euros of free cash flow (which means cash flow after investments and dividend payment), the Apple technology group has achieved the highest values ​​here. The market position of Americans is also excellent. However, due to the weakness of the sector, we have temporarily deleted the shares from our list of recommendations.

Below, we chose ten stocks mainly from defense sectors such as telecommunications and pharmaceuticals, including many US stocks, where investors also benefit from the dollar's strength. They must provide crisis price profits.

Boeing withdraws: the jet-cross-jump advantage that European rival Airbus had secured through participation in the Canadian rival Bombardier has been for the Americans through co-operation with the Brazilian aircraft manufacturer Embraer. Both giants dominate global aircraft construction because they have high cash flows. The smaller Bombardier aircraft manufacturer was overwhelmed with the development of its mid-airplane.

Boeing has another flight: Only in 2018 the investment amounts to the equivalent of twelve billion euros. Airbus and Boeing benefit from the continuing trend towards air traffic. Especially the need for economic jets is great. A serious competitor, like China, is not visible. That's why the technological development of Airbus and Boeing is too great. While Airbus is alone as a result of the upcoming top-level change and traditionally under political influence, Boeing can fully focus on business. The high value of the ten-year affair speaks of Boeing.

Conclusion: The duopoly on the market and the low political influence compared to Airbus make Boeing a good investment.

When former boss Ron Sommer announced the takeover of the US Voicestream mobile phone in the spring of 2000, this is the beginning of the end of the T-Share stock market boom. Summer had bought too expensive, then it was in Bruchsanner. Posts have changed: T-Mobile US, the mobile phone company that emerged from Voicestream, is the # 3 industry in the US. Americans are constantly growing under the leadership of the equally charismatic and aggressive boss John Leger, and have recently set a new record on customer numbers and profits. T-Mobile USA will merge with its rival Sprint, subject to approval by the US antitrust authorities, to make the AT & T and Verizon Wireless markets even tighter.

Thanks to the US energy package The German mother's profit and cash flow are also rising rapidly. Telecom has more than six billion euros in high growth in the current year, according to estimates of almost six billion euros in free cash flow. Shareholders currently expect less than five percent of dividend yield, one of the largest shares in DAX. Due to strong cash flows, distribution is very secure, despite high investment in new technologies such as the 5G mobile communications standard.

Conclusion: Moderate price performance over the last decade, but attractive dividend yield.

The series of damage caused by natural disasters, primarily from US hurricanes, has put Hannover Re far better than most competitors. The world's fourth largest reinsurer is also responding to growing competition from large asset managers like Blackrock, which are currently issuing special bonds called "cat bonds" for particularly heavy losses due to bad weather in the United States. Lower Saxony is now even a big player in this new segment. In addition, Hannover Re has recently given a strong return on capital investment.

In 2017, the reinsurer had to pay more Selling dividend shares from his portfolio to offset the extra charges from natural disasters. The recent investment return proves that the company has offset the loss of dividend income. The 3.2% investment return is above the expected 2.7%. Regarding the cash flow to liabilities ratio, an important indicator of financial flexibility, Hannover Re achieved a very good figure compared to other sectors, according to Bloomberg Bloomberg. The MDAX group from Hanover recently confirmed its forecast of attractive revenue of € 1 billion for 2018.

Conclusion: World number 4 captures challenges and offers high income from dividends.

Americans have world-famous brands: antiparasitic acetaminophen or pain killers for dolormin are among the pharmaceutical program, care products and creams of the Bebe or Neutrogena brands for consumption. With sales equivalent to 72 billion euros, the pharmaceutical and consumer goods from the US state of New Jersey is one of the great names of giants. Drugs provide half of the business. Another fourth is medical devices such as artificial joints, catheters or stents, small tubes implanted in narrow blood vessels.

Thanks to the wide range Focusing on everyday needs and medicines, the economy is less affected by the economy. In addition, Americans are market leaders in many niches. During the current financial year the cash flow increases by one fifth to the equivalent of just under 19 billion euros. Debt is not a big problem. For investors, documents are popular as a stable investment. Shares have traditionally been highly appreciated.

Conclusion: Quality has its price. Despite the high valuation, an attractive investment.

With a turnover of nearly € 46 billion in the current year, Novartis is No. 4 in the global pharmaceutical business. Tools such as Voltaren to relieve pain have made Switzerland known worldwide. Above all, the Basel-based group is one of the leading developers of anticancer drugs and the company that makes sales is, for example, Glivec, a treatment for blood cancer. Also in the so-called CAR-T-cell therapies Novartis is one of the pioneers. In the promising procedure, patients are taken from immune cells and then genetically engineered to re-recognize and kill cancer cells in the body.

Head Vaza Nazraiman wants first place in the industry that Novartis had to surrender four years ago. The giant should also be profitable. The operating margin for patent-protected products is expected to grow to 35%. This is 5 percentage points higher than the current one. The proportion of high-quality products and therapies such as Glivec and CAR-T cells in the portfolio will be expanded. Novartis US Ophthalmology Alcon is scheduled to become an independent company in 2019.

Conclusion: The pharmaceutical giant returns to the top and can afford the attack. Dividend yield is attractive.

Danes are the world leader in the preparation of patients with diabetes. The global market for medicines such as artificial insulin, as well as other medicines for diabetes related to age and nutrition, is constantly increasing. Diabetes is one of the diseases that is spreading increasingly in emerging markets as prosperity is increasing. Danes are expanding their market leadership through constant innovation. According to Bloomberg Research, Novo Nordisk will claim about 45% of the world's insulin market in 2022, with sales of more than $ 5.3 billion.

The company is currently struggling with price pressures on the US market, where about 50% of sales are generated. That is why the Danes are expanding their business outside of the United States. Novo Nordisk has an exceptionally high cash flow in terms of debt. The balance sheet clearly exceeds the annual turnover. After a weaker financial year in 2018, revenue growth in the coming year will, according to estimates, increase to about 15%.

Conclusion: Outstanding position in the profitable niche of the health market.

As an energy value, the British-Dutch group is an exception in our recommendations. As a key variable in future cash flow developments is lpreis. The list has dropped significantly lately, one of the reasons being the rapid economic outlook. Nevertheless, the leadership, led by Ben van Bourd, who held the post of Chief Executive Officer in early 2014, proved he knows how to deal with a tangible 1-year decline as in 2014/2015.

Beverd sells very unprofitable assets, increased its efficiency and with the acquisition of gas expert BG Group focuses on the growing gas market. Shell is one of the world's leading suppliers of gas. The group is also considered to be one of the most financially reliable companies in the industry. It has over 20 billion euros of free cash flow in the current year, the debt is now pleasantly low in terms of inflows. Shell has also launched a share buyback program worth $ 25 billion, with stocks delivering about six percent of dividend yield.

Conclusion: Significantly less cyclically sensitive than many competitors. High dividend yield makes stocks attractive.

Chef Ken Yoshida reorganizes the business. As a former CFO, the manager has reduced the smartphone, television and laptop sectors and pruned them for profitability. Moderate move: "Yoshida" has deprived Sony of the blurring and meaningless competitive struggles with Korean giant Samsung in the television business. Instead, the largest Japanese technology group will increasingly focus on game console and video game business and further expand its market leadership there.

The world's 60 million users The Sony PlayStation Network also broadcasts movies and music on its consoles or receives cable TV channels. These enterprises stabilize revenue and contribute to high cash flow. The leading Japanese are also on high-quality optical chips for smartphones and digital cameras. With the future technology, Virtual Reality (VR) Sony is clearly ahead of Microsoft's competitors and Facebook. With more than 21 billion euros in cash, Sony has the third largest financial reserve among Japanese corporations. Only Toyota car maker has 44.6 billion more on the high edge. Sony's cash flow is eight times greater than debt.

Conclusion: Solid balance, strong in the trend market Video and online games – this makes the group a stable investment.

The British-Dutch manufacturer of food, cosmetics, body care and household and textile products is one of the largest manufacturers of everyday products with over 51 billion euros of sales. The group also has well-known brands like Knorr, Lipton or Magnum, achieving annual sales growth of between three and five per cent.

Unilever is growing faster than the market. This is because 58% of sales are generated in emerging markets. In the first half of the year, business grew 8%, and industrialized countries – by 1.8%. The focus on growth regions strengthens the margins and the cash flow of the group. Nearly four billion euros are in the treasury, and the annual cash inflow, currently 5.5 billion euros, provides for attractive dividends.

Conclusion: Despite the imperative assessment promising long-term investment.

The American vendor of payment services Visa has just been registered for just over ten years. Shares included in the Dow Jones Industrial Index in the US increased more than tenfold from Brsendebt in March 2008. The reason: The Americans have built a global network of financial services and, at the same time, a strong brand. Visa is not only the largest credit, debit and debit card provider in the world but also one of the drivers and beneficiaries of a non-cash payment via a smartphone. The business manager works very successfully in his business: In the last quarter, for example, the $ 5.4 billion profit is a $ 2.9 billion profit. The result jumped by about a third.

The company benefits from the US economy and the consumption of Americans. In the long run, the trend towards a non-cash payment leads to the high-risk financial network business. Visa has an extremely strong cash flow of nearly 36 times debt and theoretically all liabilities are paid in less than two weeks. Nearly 16 billion euros of cash also provide security.

Conclusion: Expensive shares, financial strength and profitability are extremely high.

The ten highest values ​​for landfill stability (pdf)

So we chose:

analysis: For the search for stable stocks, we used the shares in the US and Europe as a starting point: in the US, the S & P 500,
Europe Stoxx Europe 600 as well as DAX and MDAX in Japan Nikkei 225. For the ten stocks we prefer sectors that are usually low depending on fluctuations in economic growth. Individual values ​​must show high free cash flows (free cash flow), high
Cash reserves, as well as low liabilities, legible to the cash flow ratio to the debts. Sustained dividends are also a factor in the sustainability of business models.

Cash and short-term means: Cash and securities invested in securities. Corporations use these resources, for example, to finance acquisitions or to finance measures such as redemptions.

Cash flow to debt: This is an indication of the level of debt and the presentation of the business model. High value shows that debts can be repaid quickly. Reciprocal cash flow debt shows how long the company has theoretically broken down to settle all its liabilities if it deducts the entire cash flow from operating
Will use business.

Free Cash Flow (FCF): This refers to the cash proceeds of a company from operating activities after deducting the investments. Free cash flow is used to repay loans, pay dividends, and redeem shares.

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