Bookies, EVs and Food Delivery: Europe’s 2021 Winners and Losers
(Bloomberg) -- Bookmakers, electric-vehicle manufacturers and banks have been some of the biggest winners in what’s been a stellar first-half for European stocks.
The likes of Evolution AB, Porsche Automobil Holding SE and Banco de Sabadell SA feature among the Stoxx 600 Index’s top gainers of 2021 to date, while pandemic winners such as Just Eat Takeaway.com NV and TeamViewer AG have seen a reversal of last year’s outperformance.
The moves reflect a world where investors have broken free from 2020’s defensive shackles and developed an increasing appetite for risk. Sectors that stand to benefit from a post-pandemic economic recovery, such as banks, autos and construction, have led the way, while utilities is the only European subgroup to show a decline for the year to date.
“While it is obvious that opportunities are harder to find than one year or six months ago, we do continue to find them,” said Tomas Pinto, head of international equities at Bestinver Gestion, which has 6.8 billion euros ($8.1 billion) in assets under management.
For Hannah Gooch-Peters, global equity investment analyst at Sanlam Investments U.K. Ltd., active managers should have the upper hand in the second half. “It’ll be a stock-pickers world going forward,” she said.
These are some of the biggest winners and losers among sectors and stocks in the first half.
Gambling firms Kindred Group Plc, Evolution AB and Entain Plc are all among the Stoxx 600’s top 10 risers in the first half of the year, gaining 59% or more. According to Barclays Plc analyst James Rowland Clark, industry consolidation and M&A has been “a major driver” of share prices, led mostly by the U.S., where the opportunity from sports-betting legalization continues to grow.
For Entain, the possibility of MGM Resorts International renewing its takeover interest has been a key driver, Rowland Clark says. After walking away from an $11 billion deal in January, the U.S. casino operator can renew its efforts from July 19, under U.K. takeover rules.
A push into electric vehicles has propelled gains of 42% in Volkswagen AG and 69% in parent Porsche. The stocks started to soar after VW wowed investors in March with a plan to surpass Tesla Inc. as the biggest maker of electric vehicles by 2025 at the latest.
Europe’s largest automaker is in the middle of the most aggressive push into EVs by a traditional automaker, with plans to launch about 70 battery-powered models by the end of the decade. “EV mania will go on and it will continue to be a key element of the VW story,” said Bankhaus Metzler analyst Juergen Pieper, who sees 53% upside for the stock.
European banks have gone from being one of the worst performers of 2020 to one of this year’s best. Investors expect inflation spikes to put an end to an era of near-zero interest rates, boosting interest income. A gain in bond yields, and strong markets trading activity, have also helped.
The lender to have gained most has been Spain’s Banco de Sabadell, up 70% to date. One reason has been the possibility of a merger with larger peer Banco Bilbao Vizcaya Argentaria SA, said Renta 4 analyst Nuria Alvarez. Merger speculation has also boosted Italy’s Banco BPM SpA, which has surged 57%. Analysts see the firm in a possible deal with UniCredit SpA.
Royal Mail (+72%)
One pandemic winner that’s shown no sign of stopping is Royal Mail Plc. The stock has extended last year’s 49% gain, boosted by the restoration of its FTSE 100 status and the brokering of a deal with the company’s workers’ union. The gains might not be over, according to Citigroup Inc. analyst Sathish Sivakumar, who sees scope for the parcel-delivery firm to raise prices and make them more in-line with peers.
Nordic Semiconductor ASA (+55%)
As a maker of chips for bluetooth devices, Nordic Semiconductor has benefited from added demand for wireless products during the work-from-home shift. Speculation that the company’s chips are used in Apple Inc.’s AirTags has also helped the stock, as has chatter that STMicroelectronics NV could be interested in the Norwegian firm. Still, the shares have slipped from a record high amid analyst downgrades, with Pareto Securities saying a shortage of wafers could limit the firm’s ability to deliver on its backlog.
One of last year’s star turns, renewables have fallen out of favor in 2021 as cheaper value stocks outperform pricier growth shares, and some prominent clean-energy exchange-traded funds rebalance holdings. But the likes of wind-turbine maker Vestas Wind Systems A/S and Siemens Gamesa Renewable Energy SA still trade on massive earnings multiples.
With governments pledging to phase out fossil fuels and the environmental, social and governance mantra still resonating, the sector is still likely to provide rewards for the long-term investor, according to Goldman Sachs.
READ: Goldman to See a Slow-But-Sure European Green Stocks Revival
Deliveroo Plc was the big initial public offering in London during the first half of the year, and it fell spectacularly flat. The stock closed down 26% on its debut and has slipped even lower since. Analysts see 16% potential upside from here on average, while this week’s ruling on the self-employed status of its workers was also a positive for the shares.
While Deliveroo had some stock-specific issues, like its valuation and workers rights concerns, it’s not the only lockdown beneficiary that has slumped in 2021. Rival Just Eat Takeaway.com NV has fallen 17% and work-from-home stock TeamViewer is down 23%, though for the latter, a costly sponsorship deal with Manchester United Plc was partly to blame.
CD Projekt (-35%)
Polish video game maker CD Projekt SA has extended a slump seen since December’s premiere of the Cyberpunk 2077 title failed to live up to high expectations. Santander Bank Polska SA analyst Stanislaw Czerwinski said the company faces a “long march” to repair its credibility, and doesn’t expect much of a boost from a new version of Cyberpunk for next-generation consoles planned for the second half of the year.
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