Looking for hidden opportunities on the Italian Stock Market

17 July 2020

With domestic and global demand stagnating, the Green Deal may represent a programme of important public interventions at the European level, capable of transforming climate and environmental issues into opportunities for all sectors, involving numerous Italian companies. We asked Massimo Trabattoni, Head of Italian Equity, for his assessment. “It certainly creates interesting opportunities”, he states “in a world where it is difficult to identify attractive areas for investment due to the uncertain situation created by the Covid-19 crisis, we can begin to rely on huge resources targeting sustainable investment that may involve a whole host of companies that we are focusing on. In the Italian market, there are enterprises in the field of alternative energy, i.e. photovoltaic power, solar power and hydrogen fuel that can certainly make an important contribution, if not at a global level then certainly at Italian and European level”.

Assuming that stock picking will make all the difference, where are the best opportunities at the sector level?

“The race is not won at the starting blocks, but at the finish line. What I mean to say is that whilst it is true that there are ETFs that allow investment in these specific sectors and areas and that for a certain time generalised flows may generate growth across the entire segment, it is also true that medium and long-term performance is based on selecting individual companies that are undervalued or that offer greater growth potential. Companies with better business models, well positioned in the market, with quality management and competitive capabilities. The opportunities therefore need to be sought out across all sectors. Above all in the alternative-energy sector, industrials and construction, as well as more innovative sectors, where there may be various businesses that are overlooked.”

What do you think about the situation in Italian sectors more focused on exports?

“I can see two problems in this regard. One in terms of traditional exports, those linked primarily to Germany and to the automotive sector, that is experiencing significant difficulties. Then we have the luxury sector, closely tied to international travel and in particular to the flow of tourists whose purchases have driven the boom in this sector in recent years. I think that it will still be months before we return to the pre-Covid-19 situation. Then there is also the other part of the luxury sector, represented by the top-end automotive segment. This should be less influenced by these dynamics as it does not depend on international tourism.”

Finally, do you think that the launch of alternative PIRs may provide fuel for small and mid caps on the Italian stock market?

With a good proportion of flows from investors aimed at ETFs indexed in the main baskets, often companies that are highly valid are overlooked because they are not in these indices. Considering products such as alternative PIRs that are limited to purchasing securities outside these leading indices may allow valid companies to be identified that are off the radar for investors. These are attractive businesses that we are including and which we feel are not fully represented in terms of their medium and long-term potential in current listings.”

Interview with Massimo Trabattoni, Head of Italian Equity.