Our Equity Top Pick List
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The government crisis is over – what lies ahead for Romania?
Romania has experienced five turbulent months on the domestic political front. Nevertheless, after several prime ministerial candidates failed to secure parliamentary support, a new government was finally formed in late October. The Romanian equity market, which had performed strongly during the first half of the year, lost momentum towards the end of August and entered a downward correction in September. It then rebounded in October, partly reflecting the reduced risks of a snap election and a sovereign rating downgrade to below investment grade. While domestic political tensions have subsided, the BET index has yet to recover to the vicinity of its August peak. At the same time, Romanian equities no longer appear particularly inexpensive from a valuation perspective.
Commodities - Technical Analysis
Signs of a turnaround have emerged for gold and silver, and a strong upward move could trigger the next upward wave. A breakout above the key downtrend lines could also be on the horizon, which would further reinforce the positive turnaround. The price of oil has broken below the 100-day moving average, weakening the bullish outlook, and with the uptrend broken, it has entered a correction phase. Natural gas is showing a correction following a sharp decline, but has not yet managed to break through its downtrend line. Copper continues to trade within a wide range and is approaching the lower end of that range. Following a significant decline, wheat and corn prices have reached key support levels from which an upward correction—or even a new uptrend—is likely to begin.
Our latest Investment Strategy recommends an overall neutral exposure to the equity asset class over the next 6-12 months. We believe this should be taken into account when making investment decisions in individual equities (the timing of investments or the size of positions).
The list includes those stocks, typically US and European ones, that we consider to be proper investment choices from a fundamental point of view. At the sector level, we examine the relative position of each stock on the basis of indicators (like valuation, profit growth prospects, indebtedness, quality), and then, after an individual analysis of the best performers, we select the companies we consider most attractive from a risk/return perspective.
Given the fundamental selection process, the stocks on the list should be treated as longer-term investment opportunities, but are reviewed on a quarterly basis to check whether the stock is on track with our original expectations or whether there is a sector peer with a better risk/return profile. The list can provide a starting point for building a sector-diversified equity exposure in portfolios, but can also be used as a watch list. In the latter case, the technical analysis methodology should be used to time/determine the specific investment decision. This is the purpose of our Trading Ideas report, which will also provide a specific trading strategy for the stocks on the list, if indicated.
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