What To Buy? (Sector Wise)
The following simple table looks at the sectors which share a strong share price dynamic (dubbed momentum) and which still have some decent fundamental upside.
Which sector? Upside potential next to sentiment
The defensive sectors are accelerating but remain laggards hence their upside potential. They lag in spite of Trump-inspired fears that should have made them comparably more attractive. This segment includes Utilities, Telcos, Food Retail, Insurance and Infrastructure.
By contrast, Real Estate and Semiconductors are not worth the effort.
Banks are the ever-bigger question mark as they weigh so much (12% of market caps) and have done so well ytd (+33%). They pay well and still offer a superb yield at 5.7% for 2025. For more yield, consider Oils which will not be to everyone’s taste.
For quick returns, we would not bother with other sectors as sentiment comes and goes as in a merry-go-round. As written yesterday, Paper & Packaging should be envisaged as a longer-term opportunity though.
Nobody wants to be seen with Pharmas these days. That is a shame with a view to the accumulated upside potential (+36%) for such a large sector. Like for Paper & Packaging it may pay to hold a long-term view.
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Still, it will take only a big-ish nat cat event to remind everyone of why reinsurers exist in the first place.
L'Oréal cannot afford to let its mass market business slip one inch. It may not be glorious...