Spain’s Stocks Not Exhausted

Spanish stocksSpanish stock exchange
The positive dynamic behind Spanish stocks is a fact. Carax- Alphavalue’s analysts have repeatedly stressed it and indeed have selected to be, for most of H1, over-weighted in Spain in their Portfolio, a selection of stocks for a dynamic return.
The relative performance of the Spanish coverage of AlphaValue (37 names in all) has been quite robust indeed ytd.

The Banco Popular (Option, Spain) collapse (06/06) has been swiftly dealt with, with Santander (Reduce, Spain) buying it for one euro, raising €7bn on its strong signature to reconstruct its core Tier1, becoming more Spanish in the process and preventing a bloody bailing-in of Popular’s subordinated holders. The unwritten bit of that decisive piece of action is that it protects further the respectability of signature Spain. Spain appears relatively cheap at 13.6x on a weighted P/E basis (see valuation table below) as it is dominated by banks and Telefonica (Add, Spain). The median provides a more realistic picture in the valuation (P/E at 17x) and EPS growth (17% this year). As a simplification Spanish P/Es are a meaningless middle between Inditex (Sell, Spain) (mkt cap.: €114bn) at 31x and Santander and Telefonica (combined market cap. at €135bn) at about 12.5x.

With markets having reached rich valuations and a degree of questioning possibly gaining ground, it is tempting to conclude that the money has been made on what has been regarded as a Spanish (and Portuguese) recovery in GDP growth terms. Beyond the remarkable and ever-more out of reach Inditex, there are stories carrying a Spanish flag that remain worth investigating even after the recent outperformance. Here is a list. Only Acciona (Buy, Spain) and Mediaset Espana (Add, Spain) are Spanish centric by the by.




About the Author

The Corner
The Corner has a team of on-the-ground reporters in capital cities ranging from New York to Beijing. Their stories are edited by the teams at the Spanish magazine Consejeros (for members of companies’ boards of directors) and at the stock market news site Consenso Del Mercado (market consensus). They have worked in economics and communication for over 25 years.