‘Bubble-like behaviour’ clouds market’s judgement21/08/2019
- Quality companies are being ignored by investors in favour of overpriced and fashionable stocks, argues Azvalor
Various quality stocks have dropped to unprecedented lows providing an historic buying opportunity, according to Spanish fund group Azvalor asset management.
Markets have been showing signs bubble-like behaviour this year which conversely creates its own opportunities., says fund manager Fernando Bernad in Azvalor’s latest quarterly report,
“We are seeing symptoms of speculation and irrationality in the market and see similarities today with the year 2000, because we have a market where popular stocks rise on the news cycle and unpopular stocks are crucified under any pretext. It is a market that is ceasing to calculate,” he said.
Undervalued energy stocks
Bernad points out that while markets could sometimes be inefficient in the short term, in the longer term, they tended to correctly reflect the value of the underlying assets.
He expresses confidence, for example, in several undervalued mining and oil stocks such as Cameco, Buenaventura, Tullow Oil and Consol Energy.
“The recent performance of many investments highlights the lack of insight and calculation in the market because the declines have paradoxically occurred when the companies’ fundamentals of have been improving.”
Bernad cites examples of quality stocks which were being ignored by many in favour of overpriced and fashionable stocks.
Tullow Oil, for example, recently reached a nadir of 35% of its 2018 peak yet had recently announced a significant oil exploration success in Guyana, Bernad points out.
“The recent performance of many investments highlights the lack of insight and calculation in the market because the declines have paradoxically occurred when the companies’ fundamentals of have been improving,” he added.
Madrid-based Azvalor’s funds include Mimosa Capital Azvalor International, a global equity fund which has €235m assets under management.
Mimosa Capital Azvalor International fund vs benchmark
Source: FE Analytics