Monday, September 25

Banco Santander, BBVA and other cheap blue chips to make a portfolio

The IBEX 35 will close the year with a rebound of 7 percent, which will make the selective Spanish the worst of Europe.

Apart from the drag on the tourism sector, blue chips did not exploit their full upside potential and are now trading at more attractive valuations for portfolio purposes.

According to the estimates of the consensus of analysts from in the PER ratio for the next twelve months, companies such as Arcelormittal, BBVA, Banco Santander and Repsol They are the cheapest on the Spanish stock market.

The investment selection strategy based on PER is similar to the theory of the ‘dogs of the bag’: look for the most undervalued stocks, but from another point of view.

Why is PER used?

This metric relates the market price to the profits generated by the companies. By relating price to profit, managers have an idea of ​​whether the stock is relatively expensive or cheap.

The PER reflects the times that the benefits generated by the company are being paid. Therefore, the lower it is, the less relative outlay the purchase of the company implies.

For retail investors, using PER as a selection criterion “produces remarkable results,” he says. Carlos Torres, financial analyst and author of the book ‘Investing low cost’.

In fact, with “few securities, it makes it easier to have a portfolio from which one can expect a higher return than the benchmark index,” adds this expert.

Arcelormittal, the cheapest value on the Spanish stock market

Looking at the next twelve months, the cheapest value of the Spanish stock market is Arcelormittal, which has a PER ratio of 3.37 times.

So far this year, the share price soared 49 percent, but net profit also rose sharply, to $ 4.621 million in the third quarter (compared to losses of $ 261 million the previous year).

For this reason, the PER is so low. In fact, the interpretation is that investors who buy Arcelormittal now would take 3.37 years to recover their investment as long as the generation of profits remains at this rate.

The company has benefited greatly from the recovery in steel prices. Despite the increases, the consensus calculates a price target of 40 euros, which represents a potential upside of 40.6 percent.

Banco Santander and BBVA, the options of the financial sector

Below the steelmaker, with a PER ratio of 6.34 times it is placed Santander Bank, while BBVA reaches 7.66 times.

In the case of the Cantabrian bank, the rise in the stock market this year of 16 percent has been more discreet than the 31 percent that BBVA gains.

They are percentages that do not reach 77 percent of General Society, 41 percent of BNP Paribas, 77 percent of Unicredit and 60 percent of ING Group, the references in Europe.

The advantage for Santander Bank It is the 25 percent discount with which it is listed compared to its peers, although the entity will have to face the complicated situation in Brazil next year, as explained in detail by

For BBVA, the challenge is called Turkey, after the takeover for the totality of Guarantee. With the lira in a bearish depression, experts see a black picture for the next few months.

In fact, the bank had reached the highs of the year at 6 euros at the beginning of November, but the Turkish adventure completely eclipsed its strategic plan and brought the price down to the current level of 5.25 euros.

Repsol, on the back of oil

Finally, with a PER ratio of 6.07 times, Repsol it also occupies the first positions among the cheapest values ​​of the national park.

Analysts expect a rebound of around 30 percent thanks to the recovery in oil prices and the favorable business dynamics itself. As long as crude remains at these levels, the upward path seems clear to 11.5 euros.

The great attraction of the oil company for the retail investor is the dividend yield, slightly below 6 percent.

On the contrary, the aspect to watch in 2022 is the long-awaited decision on its renewable energy division. The group has reactivated the search for new partners, but the market appetite for green energy is not the same as it was at the beginning of the year.