Stocks: the opportunities besides the broad market

“We are currently seeing opportunities in REITs, among others”, said Gerlinger. “These exchange-traded real estate investment trusts have suffered from the effects of the pandemic as a whole sector.” This is why many REITs are undervalued now. “Additionally, we continue to see a comparatively high dividend yield, even by comparison”, added Gerlinger. Given that no negative influence from interest rates is expected, REITs have become more attractive. The only disadvantage is their strong correlation with the stock market. “While this makes them look very attractive from a yield perspective, as a vehicle for diversification, they are only suitable to a limited extent”, Gerlinger pointed out.

There are also opportunities in defensive sectors. “These are areas where solid cash flows can have a very stabilizing effect, particularly in a weak economic environment”, said Gerlinger. Telecommunications, utilities, or network operators are at the top of the list. “Since we are expecting an economic recovery, however, these defensive sectors are becoming less attractive compared to those industries that have corrected significantly and are therefore enjoying advantages in terms of valuation”, Gerlinger explained.

One highly interesting sector in the long term is health care, which is considered a megatrend. The development of one or more vaccines against Covid-19 will obviously be reflected in the share prices of the listed companies producing those vaccines. “In general, though, the industry is under both price and margin pressure, which may be offset by higher sales due to demographic developments”, said Gerlinger. In addition, the fact that there will be takeovers and mergers in the future speaks in favour of the sector with the takeover fantasy driving prices. “It will be particularly interesting where the megatrend health care meets the megatrend digitalisation”, Gerlinger highlighted. “Digital health” is the key to prospects of sound returns. Although the technology sector overall is valued highly, it is also benefitting from the consequences of the pandemic, with the keywords being home office, cloud computing, cybersecurity, and digitalisation. “The sector also still offers relatively higher profit growth than almost all other industries”, said Gerlinger.

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