Three vibrant French small-cap stocks
With Emmanuel Macron’s election victory breathing life into the French economy, professional investor Eric Labbé picks three French small-cap stocks to buy now.
Each week, a professional investor tells us where he'd put his money. This week:Eric Labb of CPR Asset Management.
Emmanuel Macron's victory in France's presidential election and his resounding win in the parliamentary election have injected some much needed optimism and relief into French and European markets. For the first time in months, French equities are back on foreign investors' radars. After years of economic fatigue and disillusionment, the wider European cyclical recovery is fuelling growth and raising expectations. We believe Macron's victory and Europe's economic resilience will benefit French small and mid caps. Investors disenchanted with the UK's political and economic uncertainty and with a US economy that's running out of steam should look to this vibrant market.
Macron's economic reforms bode well for small- and mid-cap stocks. Their revenues are more domestically oriented compared with larger-cap companies. They will benefit from the liquidity premium the extra return an investor expects from small caps above other financial securities because they cannot be sold in a hurry so easily. And we are seeing more robust earnings-per-share growth, which we expect to continue as Macron's reforms gather steam.The proposal to reduce employment costs will benefit the more labour-intensive companies, including those in health services and logistics. Tax breaks for research and development will reward firms for investing in innovation. And lowering the corporate tax rate from 33% to 25% in the next five years will be a boon to companies with a tax base mainly in France. It's easy to conclude that valuations are looking a bit expensive at the moment. Take a look at the Stoxx 600 index and you will find that 30% of stocks are just 5% below their ten-year highs. And French small and mid caps have outperformed large-cap stocks by 8% in the past three months, suggesting we are entering pre-crisis valuations. Nevertheless, we expect the following three firms to outperform.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Mediawan (Paris: MDW) is a publisher, producer, and distributor of audio-visual content in French-speaking Europe. Mediawan is looking to acquire film and TV companies, and is vying to become a leading premium-content platform in Europe.
Cybersecurity firm Wallix (Paris: ALLIX) helps customers protect and secure their critical IT assets, including data, servers, terminals and connected devices. As one of the few pure cyber-security players listed in France, Wallix is well placed to respond to the growing security needs of companies, as the increasing threat of cyber attacks requires increasing attention.
Continuing with the tech theme, Solutions 30 (Paris: ALS30) a provider of technological support services, is also promising. The company has been expanding geographically and is also entering new business areas.
Sign up to Money Morning
Our team, led by award winning editors, is dedicated to delivering you the top news, analysis, and guides to help you manage your money, grow your investments and build wealth.
Eric Labbé is European equities portfolio manager at CPR Asset Management
-
A junior ISA could turn your child’s pocket money into thousands of pounds
Persuading your child to put their pocket money in a junior ISA might be difficult, but the pennies could quickly grow into pounds – and teach them a valuable lesson about money
By Katie Williams Published
-
Cost of Christmas dinner jumps 6.5% as grocery price inflation rises again
The average Christmas dinner for four now costs £32.57 as grocery price inflation increases - but what does it mean for interest rates?
By Chris Newlands Published
-
Somero: trading this overlooked bargain
Features Mechanical-screed maker Somero dominates its niche and is attractively valued. Matthew Partridge picks the best way to trade it.
By Dr Matthew Partridge Published
-
How to find big profits in small companies
Cover Story The small- and micro-cap sectors are risky and volatile. But with careful research and patience, investors could make huge gains. Matthew Partridge explains how to find the market’s top tiddlers.
By Dr Matthew Partridge Published
-
The hidden gems on Aim, London's junior market
Features Aim, London’s junior market, is risky – but you can find solid stocks at low prices. Scott Longley reports.
By Scott Longley Published
-
Is Aim finally coming of age?
Features The Aim market of mostly smaller companies has traditionally been seen as a bit of a backwater. Is it time to change that view? Matthew Partridge talks to Paul Latham and Richard Power of fund management company Octopus.
By Dr Matthew Partridge Published
-
Fetch! The Chinese small-cap stocks to buy in the Year of the Dog
Opinion Each week, a professional investor tells us where she’d put her money. This week: Tiffany Hsiao of Matthews Asia selects three Chinese small-cap stocks with exciting potential.
By Tiffany Hsio Published
-
Small and mid-cap stocks with big potential
Opinion Professional investor Guy Anderson of the Mercantile Investment Trust selects three small and medium-sized firms with promising prospects that the market has missed.
By Guy Anderson Published
-
Get cheap, reliable growth from smaller companies
Features One of the most reliable long-term investment trends is the long-term outperformance of smaller companies over blue chips. Max King picks some of the best ways to buy into this growth.
By Max King Published
-
Big gains from small caps
Features In an environment of middling inflation and low interest rates, small-cap stocks tend to beat big blue-chips. John Stepek explains why, and how to invest in them.
By John Stepek Published