The third-quarter results season is in full swing, and most of the stock’s important locomotives are already on fire. The Oslo Bors passed the test, and the benchmark index rose 5.6 percent in October, with one trading day a month remaining.
But in the past week, there were big disappointments from the tech giants who weighed heavily in US indices, and saw the most sharp price drops after that.
In general, it was noted that the quarterly reports have produced higher-than-normal exchange rates.
Experts now point to several factors that will be important for further monitoring.
most important directive
– In this season of results, the numbers as such are generally not conclusive, but what companies are saying about the future. Investor Ragnhild Wiborg says it is this guidance that has caused sharp declines for some companies.
Growth companies have been allocated such as Shepsted In Norway and most of the big tech companies in the USA are among those who have been disappointed.
Partly there was naivety in the ratings, but tech companies have done very well during the pandemic. It has become so large that when it fails to maintain its growth rate, it can no longer be priced like that. People are starting to realize this, plus the fact that tech companies are in no way protected from economic downturns. It says advertising and online shopping revenue are among the things that are being cut back now.
Storebrand manager Hans Thrane Nielsen thinks we now know most of what’s worth knowing about the reports, although there are still many companies that have the advantage of providing third-quarter numbers.
Almost all the great Norwegians came, all the great Swedes and all the great Americans except the oil industry. And then we mostly know that the third quarter was good too, he says.
However, he will keep a close eye on the listed advisory firms, as the low billing rate across the industry may give a signal that Norway is slowing down a bit.
Very reminiscent of the year 2000
Wiborg is the champion of value stocks, which she believes has been relatively unpopular for 12-13 years. It considers many of these companies in part to be extremely low rated, which remains under the radar of many investors.
– This is very reminiscent of the year 2000, when growth stocks collapsed and value stocks did better over the next five to seven years. Many of the same assumptions now underlie it.
In Norway, this applies to “old” sectors such as oil, marine services, oil services and shipping, where you think you can find more quality investments.
The investor points out that these sectors have been victims of underinvestment for many years and did not get the normal overcapacity when they started making money again:
False focus on ESG means that investor money has gone into these cyclical sectors, and at the same time many companies have a lower debt ratio than before. I find many companies with a single number P/E.
Price/earnings, or price/earnings, measures the valuation of a company in relation to earnings.
There is no doubt that the positive development of the Oslo Stock Exchange depends on the energy industry making a lot of money. Wiborg understands that the expected economic downturn will affect oil prices, but the world’s energy crisis puts a certain limit on how much they can drop in the short term.
Therefore, she believes that there are good opportunities for the stock exchange to continue to perform relatively better than other stock markets – despite the unusually large number of uncertainties in the world.
Having said that, Wiborg is pretty sure there will be a recession – and that it can go on for a long time.
Two things you have to find out
Thrane-Nielsen believes that there are now two things in particular that players in the market have yet to discover:
- To what extent central banks should tighten interest rates to stop wage inflation
- To what extent will the profitability of global companies decrease in the fourth quarter and the first half of next year
– We have a huge boom behind us for all the Norwegian sectors at the same time, which is unusual. Now it looks like 2022 will match 2006 in terms of profitability for listed Norwegian companies, then we’re talking about the best year since at least 1970.
Thus, the question is not whether profits will decrease, but how the speed will decrease and by what amount. Risk premiums are high in Europe and the Nordic countries, which is common when profits fall.
But we won’t know until the end of 2023 if there will be a soft landing or a recession. Usually, when the global economy slows down like it does now, the stock market will be shaky and give nearly zero returns in the short term.
Among the companies reporting this week is Aker, the largest investment by Thrane Nielsen’s Storebrand Norway fund.
Since Aker BP and Aker Solutions have already reported, much is known, but the director believes it is important for Aker to achieve profitable business models for renewable businesses as well. The same applies to Equinor and other energy companies that will make more green investments:
They must maintain a tight grip on costs and pay customers enough. Today, all energy costs are the same, there must be price diversification for dirt and renewable energy sources.
He likes some companies
Odin Principal Atle Hauge doesn’t think we’ve seen the full impact of the overall negative news on consumers’ ability and willingness to spend money yet. But even though he anticipates tough times, he believes there is no reason to be depressed on behalf of the stock market:
The stock market is always demanding one way or another, but there are always opportunities nonetheless.
He believes that it is not enough to buy sectors, but you have to go down to the company level to find strong business models and good operations. It then becomes important to hit the companies that hold the earnings estimates, and get rid of the rest.
– There were a number of companies that fell a lot from the third quarter numbers, and therefore they responded very positively to the perfectly good numbers. Then there were some stocks that held up well and that got more stuff. So both ends are close to average, he says.
The manager was positive about companies that had good demand, but had difficulty with delivery due to lack of ingredients.
– We had two examples last week, with Kongsberggruppen and Kitron. It’s quite clear that logistics are on the way to recovery, even if companies are trying to keep expectations a bit low. He says the customers are also industrial, so the order is safer.(Conditions)Copyright Dagens Næringsliv AS and/or our suppliers. We would like you to share our cases using links that lead directly to our pages. All or part of the Content may not be copied or otherwise used with written permission or as permitted by law. For additional terms look here.
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