Investors’ Event : Which Shares to Buy ? – Danny Reweghs

On the 4th of September, the Belgian League for Investors (VFB) kicked off the fall season again for Flemish investors with new events. Danny Reweghs, Director Strategy of the investors’ magazine Inside beleggen was invited to present his outlook on the markets and whether there were still buy opportunities in the market.

Jean-Marie Van Brussel, Chairman of VFB Trefpunt Gent opens the evening saying that the 433 billion government debt keeps on grow with 500 euro every  minute (of did he say second?). If you followed the tips of Danny Reweghs 5 years ago, your portfolio would have seen a nice increase in value. Putting your money on a bank savings account is still not a good option, while government makes life of an investor harder by adding more taxes.

Danny Reweghs opens the evening with a current macro picture. Today there is a  worldwide economic recovery, a global economic recovery of EU, USA and China with solid growth. Optimism is the highest in years. Central bankers wanted this result.

Trump’s tax plan has not seen the light yet. Trump gets more and more isolated internally and with foreign partners. Trust in USA markets is decreasing. This is reflected in the EURO value increase. However there are more and more international tensions due to North-Korea. There are relations between US and China involved. This impacts the confidence of investors and the investment climate.

What will be the outlook for Q4 2017 ?

Expectation is a volatile remaining Q4 of 2017. First a healthy, intermediate correction (5%) and then a recovery early 2018 with a potential increase of 10 -15% can be expected. In the S&P 500 index there are many strong large companies who benefit from the weak dollar. The Euro is very strong which constrains the European stock markets. Euro could increase to 1,25$.

European market will be constrained by a strong Euro value. There are possibilities for cyclic recovery. Sold dividend stocks have been the basis of many portfolios. Cyclic companies could see a recovery going forward. In case Trump would not solve economic issues, and get stuck in political issues, the elections in 2018 in the USA could have an impact going forward. Results for Trump will be crucial in the coming months. He can not afford a disappointment with his voters. Switching Obamacare in Trumpcare was a big failure so far.

Which sectors have upwards potential ?

1. Agriculture

Longterm forecast remains positive. During 2011 – 2016 there were steap price decreases and when prices reach a bottom, this means lower investments. Consolidation will happen in this sector. Recovery of prices and consolidation of different players within the sector will dominate this industry going forward.

Due to global climate change, agriculture becomes more crucial. Food price increases are to be expected in the future as the global population grows.

2. Commodities (gold) due to search for safe harbours

In times of uncertainty, gold has potential to the upside..Gold came out of a declining market since 2016. It is always a safe harbor for uncertainty. Will there be higher interest rates in the US? The job report was disappointing and the growth figure is declining. This impacts the gold price and the expectation is a higher gold price within 2018. There are a lot of opportunities for gold miners after the most severe bear market in 50 years.

3. Recovery of Utilities (Energy) sector

Energy sector due to a low oil price has suffered a lot. OPEC is no longer dominating the market. US produces what they want thanks to shales production. Total did a recent high take over. Transocean did a take-over. This means we have been too pessimistic… Oil can recover until 55 Euro. There are opportunities for comeback within the oil services sector. The sentiment has been too negative. The same applies for uranium.

There is potential of high recovery in this sector.

4. Focus on cyclic shares

Coming 6 months cyclic companies will continue to recover if the economic recovery continues.  Focus on cyclic stocks !

Economic recovery means the end of the interest rate decline. The end means the end of stabile dividend shares. A rebalancing to cyclic values which stayed behind could be your strategy.

5. Recovery of the health sector

Trump and Hillary Clinton attacked the high prices of medicines. The beatup in 2016 was exagerated. However investments in new healthcare research remains needed, so recovery will occur going forward. This sector will continue to grow.

 

Five TIPS for a BUY

Here are 5 tips of stocks that COULD have upwards potential. They should not be regarded as the CORE vales within your portfolio. You should buy holdings such as Sofina, Akkermans, and other holdings on BEL20 index. Below companies are potential gainers going forward.

1. Ablynx (Ticker : ABLX)

Here the focus is on new medicine Caplacizumab, potential blockbuster. This could be THE switch from an unprofitable company to a profitable company thanks to this medicine. Danny explains the medicine pipeline of Ablynx in 2018.

Target : 18 Euro dependent on good results

2. Cameco (Ticker : CCJ)

This is a recovery potential of uranium.

China and India expand nuclear energy production. There is no shortage today due to high reserves. All shares are very low today. Uranium prices are 1/8 of the highest price. Uranium is not dead…there’s high potential going forward.

3. Goldcorp (Ticker : GG)

Here you play the recovery of gold. This is 4^th biggest gold mine. Very low cost price production today. There is a lot of upward potential.

4. Mithra (Ticker : MITRA)

Is this the year of the truth?

Another biotech with potential. Danny explains the mission of Mithra within the health sector. He also stresses that the value of this company is very low…although there is a lot of potential. Mark Coucke and the CEO bought many shares extra…can the stock price double?

5. Nyrstar (Ticker : NYR)

This is a turn around candidate. There has been no stability at the top. There is new management who acts pragmatic. Current price is 6. Competitors are priced around 30. There is a large debt. With high prices of sink, recovery potential must occur now…This is a trading stock and not a buy and hold stock. This is only 6 month only potential recovery from 6 to 10 euro…

Here’s the presentation if you want to review it in DUTCH : Presentation VFB 4 September 2017

 

Our Own Opinion

Searching stocks with an upwards potential in a high P/E (for some overpriced) market, is looking for turnaround candidates and companies with (potential) good news. It is a kind of gamble. It can work in your favor but also not. ..

Ablynx, Mithra Pharmaceuticals and Nyrstar are such kind of companies working on good news and better company results which can be reflected in a higher share price. Ablynx needs to break 13 Euro and Mithra above 11 Euro. Nyrstar is breaking out above 6,30 Euro and could move to 7 or 8 Euro but this needs confirmation…it had already a nice trend move from 5 Euro bottom.

Cameco and Goldcorp are “commodity recovery plays”. The trend on uranium is still declining and the bottoming out has not finished. The same applies for the gold miners sector. Goldcorp is back at his bottom level. As long as markets go higher, gold will drop. The recovery of the commodities sector has not started yet and it can continue like this during many years. Who says we will ever see the highs again from previous years? I believe you better use the trackers URA (Uranium ETF) or JNUG/NUGT ETFs if you believe in a gold or uranium longterm recovery. Take a look at the ETF with ticker LIT (Lithium) as this breaks out to 37 now. I alerted this in one of my older blogposts around 30$ level. Look for the breakouts !!

Final Conclusion

Stock market closed at a new record high…as Trump prepares his tax cut plan, the stock market is already running higher. Do you need turnaround candidates or companies in your portfolio with a POTENTIAL homerun? It could also be bad news and run lower… where is your stop loss?

Decide carefully on your position size if you invest in ONE company. Otherwise use an ETF to invest in a potential healthcare recovery. We used our software to look at the last 6 months performance within gold miners sectors and the company Kirkland Lake Gold (KR)  had a 60% recovery during the past 6 months….

Personally I don’t follow analyst tips to purchase stocks but I understand that the buy and hold investor in Belgium looks for BUY tips. Whether the market will correct in Q4 of 2017 and then recover in early 2018, nobody can predict…not even Danny Reweghs. The market may run higher two years more and then drop 60%…and I could be right. Nobody can predict and time the market. You just have to be prepared for each market situation and adjust your investment strategy as needed.

Good luck with your investment strategy ! As always we end with a quote. Think about this one ….