Our Equity Top Pick List
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After 26 years, the Italian stock market hit a new high
When looking at the ranking of the best-performing stock indices globally so far this year, it’s easy at first glance to overlook the Italian stock market, even though the FTSE MIB index has been gradually climbing higher over the past three years and, at the end of May this year, hit a new all-time high for the first time in about twenty-six years. The financial sector carries significant weight in the index; however, the top three best-performing components so far this year are not bank stocks, but rather the shares of a technology company, an energy company, and an industrial firm.
Europe's industrial sector is experiencing a surge in momentum
The rotation away from the U.S. technology sector is becoming increasingly pronounced, with Europe benefiting regionally and cyclical exposures—particularly the industrial segment—benefiting sectorally. Normalizing energy prices, improving growth prospects, a manufacturing sector that appears stronger than in previous periods, and German fiscal stimulus measures are all benefiting European industrial companies, and the iShares STOXX Europe 600 Industrial Goods & Services ETF (EXH4), which tracks these companies, reached a new all-time high yesterday, which we believe presents a favorable trading opportunity.
We have updated our Equity Top Pick List to reflect the events of the past quarter. The list includes those stocks, typically US and European ones, that we consider to be proper investment choices from a fundamental point of view. It can provide a starting point for building a sector-diversified equity exposure in portfolios, but can also be used as a watch list. Technical analysis should be used to time / determine the specific investment decision.
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. We note that that our latest Investment Outlook recommends neutral overall exposure to the equity asset class.
Over the past quarter, we have removed the stocks of Ero Copper, Albemarle, and PayPal from our list. The latest analyses of the stocks that are still on our list are available at the links below:
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