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ThreecheapbutsolidstocksMoneyWeek

四月10th,2019|

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HavingfacedtheprospectofaEuropeanbankingcrisis,theEuropeanCentralBank(ECB)finallyunleashedthemuch-neededliquiditysoughtbyEurope’stroubledbankingsector。

Asaresult,banks,particularlyintheperipheralnations,usedcheapfundstobuyuptheirownsovereigndebt,effectivelybettingonrecovery。

This,coupledwithreasonableprogressoneconomicreforminSpainandItaly,restoredriskappetiteandconfidencefromtheirextremelows。

Incontrasttolastyear,thenumberofcentralbanksineasingmodehasincreased。

Anumberofemerging-marketcentralbankshavejoinedthefray,notablythePeople’sBankofChina。

Wethinkriskassetswillcontinuetobereasonablywellsupportedforaslongasthistrendpersists。

However,afterastrongandalmostuninterruptedrallysincethefirstECBliquidityinjection,equitymarketsaredueapauseforbreath。

Itisbecomingmoredifficulttofindvalueandwearestartingtoseesomefairlymutedshare-pricereactions,evenwhencompaniespostdecentresults。

Indeed,giventherecentsubstantialoutperformanceofcyclicals,thereisacaseforreducingexposurehereandrotatingbacktomoredefensiveareas。

Cautionisrequiredinthefinancialsectorinparticular。

RecentECBactivitymayhaveallayedsomeoftheshorter-termliquidityconcerns,butthelonger-termheadwindsofregulation,profitabilityanddeleveragingremain。

Recentmovementsintheoilpricearealsounwelcome–acontinuedrisehasthepotentialtoinflictrealdamageonarecoveringglobaleconomy。

Overall,investorsshouldrealisethatEuropeisn’toutofthewoods。

Theforcesatworkinthesovereignbondmarketareespeciallytroublingandinvestorsneedtotreadverycarefully。

InBritain,forexample,theBankofEnglandnowholdsaround30%ofoutstandinggilts。

This,combinedwithregulationsforcingcertainfinancialinstitutionstoholdgiltsdespitelowyields,hasresultedinsomefairlydeepmarketdistortions。

Insuchachallenginginvestmentenvironment,investorsshouldseekwell-positionedstocksthatofferdecentvalue?

Centrica(LSE:CNA),theownerofBritishGas,hasunderperformedboththesectorandwidermarketoverthepast12monthsandnowlooksgoodvalue。

Recentresultswerereassuring,giventherecentconcernsaboutamarginsqueezeandtheimpactofacomparativelywarmwinter。

Thestockalsoboastsanattractiveandgrowingdividend。

Senior(LSE:SNR)isastockthathashadaverygoodrunsincewefirststartedbuyingit。

Followingstrongrecentresults,itcontinuestooffergoodvalue。

Thefirmisahigh-techmanufactureroperatingmainlyintheaerospaceandautomotivesectors。

Whilethesecondoftheseisarguablylessvisible,therecordorderbooksatitslargestcivilaerospaceclients,BoeingandAirbus,offerahighdegreeofcomfort。

Ithasahealthybalancesheetandiswellplacedtomakestrategicacquisitions。

AdvancedMedicalSolutions(LSE:AMS),theAim-listedwoundcareandsealantspecialist,offersinvestorsexcitinggrowthprospects,givenitsstrongproductportfolioandwideninggeographicreach。

Recentshrewdtakeovershavecomplementeditsproductportfolioandwelookforwardtocontinuedprogressinnewmarkets,particularlyinAmerica。