Story of the month

The 2023 equity year was characterized by a surprisingly strong upwards movement. however, the boom was not driven equally by all sectors. Highly capitalized stocks from the technology sector in particular pushed up the index levels. at the start of the new year, this is a warning sign for many that too much upside has been priced in in the short term. in other sectors, however, there are still many stocks that are trading far from their highs in some cases due to the heterogeneous development of the previous year.

OPPORTUNITIES IN THE DEFENSIVE CONSUMER AND HEALTHCARE SECTORS

Two defensive sectors were unable to keep pace with the broad indices last year. Firstly, the consumer sector, which suffered from concerns that high interest rates and energy prices were weighing on consumers' appetite for spending. Coca-Cola , Nestlé and Co. were also unable to capitalize on their defensive qualities since the recession largely failed to materialize. Secondly, the healthcare sector should be mentioned. Apart from special developments at Novo Nordisk and Eli Lilly, which are benefiting from strong demand for anti-obesity drugs, most pharmaceutical stocks, and suppliers such as laboratory equipment suppliers Thermo Fisher and Danaher were unable to record any significant price gains. What both sectors have in common is that they experienced a kind of boom during the coronavirus period (due to coronavirus tests and the production of vaccines as well as the "stay-at-home" trend, which increased online consumption in particular) and are now going through a phase of normalization. As a result, the valuations of many defensive stocks had fallen significantly again by the end of 2023.

SHARES OF SMALLER COMPANIES STILL LAGGING BEHIND

Many second-tier stocks have also recovered much less dynamically from the losses of 2022 and are still far below their old highs. On the one hand, there are good reasons for this development: mid-caps had outperformed the major indices for a long time until around mid-2021, and valuations were correspondingly ambitious. In addition, the technology leaders in many innovative areas are mostly large companies. Nevertheless, due to the now more attractive valuation ratios, it may be worth looking at the second tier, for example at companies that are active in a niche and have the competitive advantages of a "big fish in a small pond" and are consolidating their market through skillful acquisitions.

CONCLUSION: LAGGING SECTORS STILL OFFER OPPORTUNITIES

After a strong year for the major stock indices, our analysis suggests that it could now be worth looking at recently neglected sectors and segments. In our opinion, stocks from the mid-cap segment as well as healthcare and consumer stocks offer potentially good entry opportunities.