HIT THE ROAD, MAC. That's the message that many investors are sending to European sell-side research directors these days by favoring stock recommendations over the top-down, macroeconomic insights that had been in high demand, owing to economic and political turmoil across the euro zone and around the world.
We are back to company-specific analysis, which is good news for bottom-up research like ours, declares Vincent Laurencin, head of research at Exane BNP Paribas in London. Picking winning business models at a reasonable valuation is difficult but possible. Predicting politics is not.
Adds Mark Iannotti, head of research for Europe, the Middle East and Africa at Bank of America Merrill Lynch in London: Clients are asking for our views on sectors and countries, and we have become more focused on individual stocks.
Thats a dramatic shift from last year, when portfolio managers were riveted by such issues as the ongoing sovereign debt crisis in Europe and the fear that its economic union could disintegrate, a potential crash-landing for Chinas economy, the prospect of the U.S. tumbling over a so-called fiscal cliff of spending cuts and tax hikes that were set to take effect in January 2013 and so on. But the doomsday scenarios many market observers envisioned did not come to pass. Although few would insist that the regions financial crisis is over last months revelation that the seemingly invincible German economy had contracted in the fourth quarter was an unwelcome reminder of just how fragile the recovery is the environment has become more conducive to stock selection, as opposed to a total focus on the macro and strategic view of sectors, explains Richard Smith, director of EMEA equity research at Deutsche Bank in London.....