Battered by the impact of the coronavirus, European shares are headed for their biggest quarterly drop in 33 years. But not all have lost value, with health-care companies not surprisingly leading a select list of gainers.
Others to have bucked the market’s downward trend have included those that cater to the millions of people ordered to stay home, such as food deliverers and video game-makers. Sectors viewed as defensive have also been popular.
According to Cesar Perez Ruiz, chief investment officer at Pictet Wealth Management, stock-pickers should look for companies that can weather the Covid-19 storm, with low leverage being the most important factor.
“We need to buy companies that we are sure are going to be able to survive through this uncertain period,” Perez Ruiz said in a call with reporters, noting that biotech and medical-testing companies will be sought after even once the pandemic passes.
In total, just 32 of the Stoxx Europe 600 index’s members are showing gains in the quarter to date. Here, we look at some of the best of them.
Ambu A/S is the best-performing health care stock so far this quarter. Handelsbankensaid last week that the company remains among the top Nordic medical-technology picks, with the virus potentially boosting demand for its single-use products as hospitals seek to avoid spreading the infection.
Diagnostic test makers are some of the most notable outliers in the past quarter. France’s BioMerieux has soared since revealing a rapid diagnostic kit for Covid-19 that has been approved by the FDA. “BioMerieux investors anticipate that demand will remain strong and provide some buffer to the company’s financial performance,” Scott Bardo, an analyst at Berenberg, said by phone.
German peer Qiagen NV, which also has a Covid-19 test, owes its outperformance to Thermo Fisher’s offer to buy the company for about 9 billion euros ($10 billion). Its portfolio of products to aid in testing for the virus “has provided comfort for investors that the proposed takeover will proceed,” Bardo said, adding that he expects the shares to remain resilient over the next 12 months ahead of the deal’s closing in 2021.
Sartorius AG, a global leading provider of bio-processing solutions, is continuing to benefit from robust demand that preceded the Covid-19 outbreak, Bardo said. The anticipated closure of the company’s deal to buy assets from Danaher is also supporting the shares. “It’s actually one of the few companies with some earnings upgrades for 2020, potentially on the basis of this deal,” Bardo said, adding that government and pharmaceutical efforts to develop a vaccine for the virus could also boost demand for the company’s products.
Ambu’s Danish peer Coloplast A/S has remained in the green despite cutting its full-year sales forecast as its urology business takes a hit from delays in elective procedures due to the virus. The bulk of the company’s business, which comes from chronic care markets, remains relatively stable, according to Bardo. While Coloplast isn’t immune to the crisis, the impact is more modest than for others in similar areas, he said.
HelloFresh SE, a German company that delivers meal-kits, hit a record high this quarter. Mirabaud analyst Neil Campling notes that the company is well-positioned for any impact from the virus on supply chains given that it doesn’t rely on one wholesaler. “If you’re looking for at-home forms of entertainment, then meal-kits are a great example of that where you’ve actually got a bit of extra time,” he said.
Communications and Infrastructure
Cellnex SA, the Spanish telecom tower company, is the best-performing member of the Stoxx Telecom Index, which has held up better than most sectors given its defensive merits. The risk from a likely downturn in the economy to Cellnex’s business is very limited, New Street analyst James Ratzer said in a phone interview, given that the company only has a small number of customers in each market, and those are generally well-capitalized telecom firms.
Belgian grocery chain Colruyt SA is among the lowest-rated European retail stocks, and yet it has outperformed most other food and drug retailers so far this year. Like its supermarket peers, Colruyt is benefiting from consumers stockpiling amid a lockdown as the country tries to combat the virus, according to Fernand de Boer, an analyst at Bank Degroof Petercam. He’s the only analyst tracked by Bloomberg that has a buy rating or equivalent on the stock. De Boer also notes Colruyt’s strong financial position, which means the company won’t have any problems refinancing, paying a dividend or worse.
Swedish Match (+9.5%)
Swedish Match AB has outperformed European tobacco rivals so far this year, continuing a trend from 2019. One thing that sets the company apart is its Zyn nicotine pouches, which are both smoke-free and tobacco-free. Zyn has been expanding in the U.S., and the sales opportunity in that market could amount to an estimated $4 billion in the next 5-6 years, according to Tristan D’Aboville, an analyst at William O’Neil. There’s also untapped potential in several other markets, said AlphaValue analyst Laura Parisot.
— With assistance by Hanna Hoikkala, and Kit Rees
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