Our 10 favorite stocks for the second half of the year

The first six months of 2024 were still rosy for global stock exchanges. Will things be different in the second half of the year?

We’ve made only minor adjustments to our pick of preferred stocks for the second half of the year compared to our December pick for the full year. We do this partly because the hoped-for increase has not yet occurred for a number of preferred candidates, and partly because the possibility only extends beyond 2024. The selection is done in alphabetical order, not in order from the largest to the smallest contestants.

Favorite 1: Aker BB

Oil prices are witnessing a temporary decline after falling in recent months from about $90 to $70 per barrel. Oil-producing countries no longer aim to reach prices of $100 or above per barrel, but they will not allow prices to fall much further. If necessary, they limit production. Moreover, sooner or later the United States will have to replenish its historically low strategic oil reserves. an average Aker BP is strongly linked to the price of oil, with oil representing about 85 percent of the group’s production. The stake was again in the balance with Schlumberger, but Aker BP also offers currency diversification using the Norwegian krone, which should typically benefit from higher oil prices and potential concerns about massive budget deficits and debt levels in many Western countries, issues it does not have. Norway absolutely does not have.

Favorite 2: Albemarle

We believe it is only a matter of time before the price of lithium rises again. Albemarle will benefit greatly from this. The company believes it can increase lithium sales by 20 to 30 percent annually over the next five years. Lithium is an essential raw material for greening transportation, and is indispensable in powerful batteries for cars, laptops, smartphones, power banks, etc. Most reports expect demand for lithium to increase four-fold by 2030. Meeting this demand will be a major challenge on the supply side. There is enough lithium worldwide, but to exploit it economically, only a small portion of the Earth’s supply is eligible. New battery factories are being built without a guarantee of lithium supply. Current producers also have only a limited number of new projects. So scarcity threatens to become a real problem in the next five to ten years. This seems to us to be excellent news for Albemarle. The stock can now be had at a very reasonable price.

Favorite 3: Atenor

Real estate stocks were unable to continue their strong rise in November and December until the first half of 2024, including real estate developer Atenor. The sharp decline in long-term interest rates at the end of last year did not continue. Due to the forced capital increase, the share price fell by about 5 euros. As a result, the stock fell significantly compared to its intrinsic value. The slightest signs of recovery or the implementation of some projects should lead the stock into the recovery phase. We would like to point out that the risk of this investment is above average, because the balance sheet still contains a lot of debt, although the first three-month update showed that this is being worked on.

Favorite 4: Covenimo

As with Atenor, it is necessary to be convinced that long-term interest rates will fall during the second half of the year. This is necessary to enable real estate equity to increase. The regulated real estate company (GVV) with a focus on healthcare properties is undervalued in this context, with a 35 percent discount to intrinsic value, a dividend yield of 9.5 percent, and a risk premium of 7 percent (a 10 percent dividend yield vs. %). Back on government paper for ten years). The current debt ratio of 44% makes fears of a new capital round exaggerated. In addition, the risk of further write-offs is decreasing due to limited vacancy and stable rental yields.

Favorite 5: Mosaic

After under-fertilizing farmland on average over the past two years, global demand for potash and phosphate fertilizers will return to the record levels of 2020 and 2021, respectively, in 2024. At the same time, agricultural crop and fertilizer stock levels have reached consumption levels approaching the lowest levels in The past twenty years. The expected restocking combined with limited room for upward maneuver in supply should allow fertilizer prices to rebound. Mosaic stock is trading below book value and above average will benefit from the expected price recovery. The recent rise in grain prices could be a harbinger of a rebound in fertilizer stocks.

Favorite 6: Newmont

Over the past two years, the stock has performed much worse than the Van Eck Gold Miners Index, the benchmark index among gold miners. As a result, the valuation has fallen to 7 times expected cash flow, but the price has already recovered 30 to 40 percent since its five-year low in March. Rightly so, because The prospects for 2024 and beyond have improved significantly with the acquired Newcrest Mining assets. Many items that had a negative impact on the price in 2023 will disappear next year. Shareholders can also expect higher dividends. The strong balance sheet also leaves room for stock buybacks. In terms of valuation, Newmont is much cheaper than Agnico-Eagle Mines, for example.

Favorite 7: American Silver

The price of US silver (PAAS) has already recovered 60 percent since its low in early March. However, we still see potential for growth this year. Profit margins are increasing again, with gold and silver prices rising. The American countries are financially healthy. It still has an attractive pipeline of expansions and new projects, which it can finance itself. PAAS now trades at about 10 times cash flow. This number is still reduced compared to the average of the past ten years.

Favorite 8: Sibanye Stillwater

Sibanye Stillwater was created as a spin-off of Gold Fields with the group’s gold mines in South Africa as assets, but over the past decade the group has undergone a significant transformation. Gold mines now provide only a quarter of the group’s sales. The focus is now on raw materials such as platinum, palladium, rhodium, etc. Given the evolving prices of these highly volatile raw materials, the group has recently sought to diversify into battery materials, such as nickel and lithium.

For more than a year now, palladium prices, among other things, have shown their more volatile side again. Very sharp price declines have made 2023 a terrible year for Sibanye-Stillwater. If that was not enough, there were floods and fires, and even a number of exceptional business-related events also affected the results. It therefore makes sense that we have seen a hefty price penalty (-75%) in the last couple of years. Therefore the possibility of recovery is very high if metal prices start rising again and the company has better control over its operational affairs. The risk is higher than average.

Favorite 9: Umicore

In recent weeks and months, there has been news that shareholders viewed as negative. First, the Belgian state acquired a 5% stake in Umicore through the holding company SFPIM, due to the strategic nature of the company for our economy. In addition, CEO Matthias Medrich suddenly resigned, once again putting the problems surrounding battery materials on the radar of analysts and investors. Because of this additional penalty, the value of the stock is now very cheap. Investors no longer have any expectations for this share anymore. The recovery in a number of (precious) metal prices suggests that the results could resume growth as well. The relatively low price provides investors with a good entry into 2024. In the long term.

Favorite 10: Vodafone

Sentiment towards the telecom sector is at its lowest levels. This is reflected in Vodafone at a valuation of just 3.5 times expected EBITDA. That’s cheap. Vodafone could positively surprise this year with higher profit margins thanks to cost savings. These should come from the restructuring program and a much lower energy bill. It is important that the recovery in the German market continues. Investment costs will also decline in the coming years. Vodafone is also working on a simplified group structure, although the investment climate is not ideal for large transactions. The most attractive thing about Vodafone is its dividend, which remains very high even after the expected dividend cut.