Foreign equities: “It pays to invest outside the mainstream”
America first is not only the motto of the hour for Donald Trump, but also on the stock markets. American second-line stocks and shares from the crypto segment in particular are benefiting from the comeback of the US president-elect.
5 December 2024. FRANKFURT (Börse Frankfurt). Trading in foreign stocks on Deutsche Börse's marketplaces continues to be dominated by the results of the US election in November. While the Euro Stoxx 50 fell slightly in value in November, prices on the US markets continued to rise. Tech expert Stefan Waldhauser has been observing a “rotation out of blue chips and into second-line stocks” for several months now. Unlike in Germany, American small caps have recently performed significantly better than blue chips. This trend has even accelerated during the quarterly season. “We had not seen such a phase of outperformance by smaller stocks for many years,” explains Waldhauser, who sees this development as a ‘very good sign’ that ‘rationality is returning to the stock markets’.
Wrong valuation for American internet holding?
According to Waldhauser, the ongoing “revaluation of small caps that have been neglected for a long time” should ensure that “investing outside the mainstream should also be worthwhile in the coming months”. One of his current favorites is the internet holding company IAC(US44891N2080), which he considers to be “significantly undervalued”, having lost almost 85% of its value within 1.5 years from its high in March 2021. A volatile sideways movement has been underway since then. The software expert is “optimistic that in 2025, with an ANGI spin-off and an IPO or exit of Turo, the stock market will discover and correct the mispricing”.
Just how quickly such a revaluation can take place has been demonstrated by the shares of the video platform Vimeo (US92719V1008), which rose by around 50 percent in just one week following the latest quarterly report. According to Waldhauser, the positive trend could continue as soon as investors perceive Vimeo even more strongly as a “growth company with a solid cost structure and a capable team”.
Crypto hype also on the stock market
In addition to US equities, investors are currently particularly keen on stocks that are benefiting from the rising prices of cryptocurrencies. Of course, this also has to do with the election of Donald Trump, who had previously outed himself as a big crypto supporter. At Baader Bank, demand in this segment remains strong, as trader Roland Stadler reports. For example, the shares of Bitcoin development company Microstrategy (US5949724083) and Mara Holding (US5657881067), a developer of technologies for digital assets, are being traded. Both stocks have performed well above average in recent weeks.
Investors have identified companies active in the renewable energy sector, among others, as potential losers of the US election result. This can be seen both in the falling share prices and the increased losses in shares such as Enphase Energy (US29355A1079) and First Solar (US3364331070), although these have stabilized in recent days.
A comeback for spirits producers?
On the European markets, Jonathan Neuscheler from Abilitato GmbH sees good signs for the well-known players in the spirits industry, which have come under considerable pressure this year. Diageo, the market leader, has lost 18 percent of its value so far, while Pernod Ricard, the number two, has even lost a third of its stock market value. The managing director of the independent equity research and financial education platform blames this on the still well-stocked warehouses of retailers and customers, among other things. “Added to this is the sharp rise in the cost of living, which is why some consumers are switching to cheaper brands.”
For Neuscheler, however, these are only “temporary factors”, as spirits are non-cyclical consumer goods with recurring demand. He also believes that the risk of higher tariffs on imported spirits (especially whiskies produced in other countries) is already priced into the valuation of Diageo shares (GB0002374006). According to his calculation, the share is currently trading at a “discount of around 20 percent to the average value of the past ten years” at the 2025 P/E ratio. And this in the hope of further accelerated economic growth and lower corporate taxes in North America, the “most important market for the British company”. Neuscheler therefore sees Diageo as a quality share that is well suited for a buy-and-hold investment.
Favorable valuation meets good growth opportunities
In the case of Pernod Ricard (FR0000120693), the stock expert particularly praises the “excellent positioning in emerging and high-growth countries”. For example in India, where the group has a 48% market share in premium spirits. Neuscheler therefore believes that the company will achieve higher growth rates in the future. At the same time, the valuation has “fallen to its lowest level in the past ten years” with a 2025 P/E ratio of 14, as calculated by him. The long-term valuation average is therefore a P/E ratio of 22. In addition, the dividend yield, which has risen to 4.4 percent as a result of the share price slide, is “far above the ten-year average of 2.1 percent”. In a detailed analysis at the end of October, Neuscheler therefore advised to “anti-cyclically increase” the position in the event of further share price losses. Since then, the share price has fallen by 15 percent.
ByThomas Koch, 5 December 2024, © Deutsche Börse
Deutsche Börse 
