SocGen’s Lapthorne Sees Bargains From ‘Stupid’ Stock Markets

(Bloomberg) -- Many stocks have become so inexpensive that longer-term investors stand to make substantial profits off them, according to Societe Generale SA.

Every crisis is different, but a common pattern is that it takes time to get a concept of where earnings are, according to the bank’s global head of quantitative strategy, Andrew Lapthorne. Prices need to get low enough to absorb any future downgrades, then from there’s it’s just dealing with the volatility, he said.

The market meltdown induced by the spread of coronavirus, which has the MSCI all-country stock index about 26% off its February high, is going through that process now.

“There’s quite a decent amount of stocks in the market where they are so cheap that I’m willing to take around 20% more downside because on a one- to two-year basis I see 100% upside,” Lapthorne said in an interview Thursday. “Equity markets are incredibly stupid,” he said. “Earnings go down by 50%, then the stock goes down 50%,” even though earnings and business value aren’t the same thing, he said.

Lapthorne didn’t specify which stocks he’s considering. But one market he likes in particular is Japan, because of relatively strong balance sheets.

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