Adriano, wait a few weeks before buying the dip in italian securities. Italy is one of the most indebted regions in EU with one of the worst bank sectors, the amount of shit loans they have is astounding, by any measure. If the virus spreads in France/Germany/UK no one will care about Italy, and Italy itself won't have the firepower to fix their economy.
The macro-rundown from EU:
Germany has a very low debt level, 55% of GDP, and has run suficit for the past few years. It has quite a few distressed corporations, I should imagine none of them will go under, but its good to bear in mind. Deutschebank is very indebted, and Germany simply won't become the sole country in EU with no big bank (commerzbank is mostly local). Then there is the automotive sector (which accounts for quite a few number of employments), heavy disruption in the supply chain, hit on demands in europe and china (for example, 80% of geely's orders have fallen in february year on year from february in china, today it was reported), may result in significant need for liquidity for payments to suppliers/workers. Additionally, you have the airlines, the german champion Lufthansa, with flights collapsing, they will most certainly need an injection. Then you have the mittelstand, which all of them will be vulnerable. Germany most certainly can weather this storm and without breaking much sweat, therefore I think, barring any additional disaster, all of these firms could be good value, if the market are not pricing these things in (which I don't think they are).
Germany wields ‘bazooka’ in fight against coronavirus
https://www.ft.com/content/1b0f0324-6530-11ea-b3f3-fe4680ea68b5
The UK is super interesting. The level of debt is not that significant for them because of having their own currency, their corporate sector is poo-poo. There are a few "british - xx" firms that are at high risk of collapsing. The first one is Centrica, or British Gas, has a shit ton of debt as a result of a price cap imposed by the governemnt, it has lost like 90% of market cap in past few years. Still has 22% yield dividend. If it goes down, the government is 100% to blame. Huge upside potential, assuming the government intervenes, along with a nice dividend, assuming it keeps giving it.
- Then there's British Petroleum, aka BP, currently trading at an all time low, although no looming debt risk, it is trading at the absolute rock bottom at 278 gbx, or 2,78 pounds, with 10% div yield. How valuable it is? Think of it this way, it was trading at rock bottom of 304 gbx during it's oil spill, no need for Gov, as the saudis will stop flooding the market. Anyhow BP has the firepower to weather this storm too.
- British Airways CEO said just a few hours ago that they face an existential crisis
BA boss says airline faces fight for survival
https://www.ft.com/content/f402d0e0-652e-11ea-a6cd-df28cc3c6a68. They have a 200% debt to equity ratio and with the current situation in europe and USA, it will balloon. I would not touch this as its not listed as BA but IAG(international aviation group) which has iberian airways and few others, hard to see how they get a bail-out. Another british airline is easyjet, which has great business model and modest debt. Right now not trading at prices which would make it attractive, but one to keep an eye on as its dipping fast.
- British Telecom aka BT. I don't know where to start with this mess, but it has lost 85% of value over the past few years and it does not look like it will get any better, no idea if gov could bail them out.
France is another distressed country. Albeit it has less debt than Italy, it is still not considered as a sure fire bet as Germany, which can virtually get as much debt as it wants. The problem with France is that it has, even know, a bigger than all EU countries a budget to GDP ratio, largely due to pensions and horseshit social protections. With that being said, it is the 2nd biggest economy in EU and there would be political ramifications were people (Germans) to dismiss their distress - the political ramifications being the very existence of EU. There are a few France based companies that I follow.
- Renault, obviously being the first one. This piece of shit company has burnt my ass worse than a gonorhea infected dick, yet here I am doubling down on it. Renault is an absolute garbage company, dysfunctional management (before the new CEO, no idea how the new one will cope), dysfunctional partner in Nissan (&Mitsubishi) and an unsupportive Government which has 15% stake in it. Why do I think that it will sky-rocket? It simply can't go any lower, it employs 150.000 people, government has a stake in it, government blocked a merger (or at least deterred a merger),therefore if France lets it go bust, people (or maybe just me) will get the pitchfork. It does have a short debt burden, but i think they will cope. Its partner nissan is trading at an all time low, with Renault only ever trading lower during the financial crisis. It has a 45% in Nissan, solid electric energy, lots of scale in manufacturing and a great partner with Global reach for many companies.
- AirFrance-KLM, i dont know enough but its even worse than Renault and it has a piss poor reputation among french ppl so quite sceptical they get bailed out.
One thing to bear in mind, if Germany will bail its firms, the others will call for same.
Companies that are very well run, who depend on physical visiting the stores are suffering and could be great value, starbucks at $65, greggs at 16pounds, are something to keep an eye on.
10 years of FIF
