In view of the low visibility of the economic outlook between now and 2021, it may be appropriate to focus on sectors with a more predictable investment cycle, particularly those related to technology. Due to the characteristics of the listed securities, Piazza Affari is, however, not very well matched on the investment themes that can be immediately rewarded by the post-COVID-19 situation. But let’s try to better understand what the prospects for Italian stock prices are together with Massimo Trabattoni, Head of Italian Equity.
“The correction was profound and undoubtedly created opportunities”, explains Trabattoni, “also because the rebound that followed was perhaps even more disorganised. In fact, in the recovery phase, securities have often been rewarded only for belonging to a specific sector, regardless of the quality and characteristics of the individual company. It is clear that, in Piazza Affari, there is no Nasdaq assortment, but rather types of businesses that are, for the most part, traditional or mature. It is, however, possible to identify dynamic companies that, in the Italian world, are the target of investments directed towards innovative technologies”.
Meanwhile, what emerges from the publication of the quarterly reports?
The picture we get from the first quarter figures is probably less negative than one might expect. But this is explained by the fact that the supply chains of the industrial district upstream of the companies are suffering more than the listed group. Having said that, I believe that it is not so much the demonstrated ability to withstand the impact of the health emergency that should be prioritised, but rather the prospects for getting orders, billing and generating cash flows. For example, in the financial sector, asset management and payment systems still offer selective opportunities by analysing the customer target and business model in detail.
Speaking of sectors, where are you focusing your attention?
Preference should be given to companies involved in investments that can no longer be postponed, such as computerisation, new equipment, energy efficiency, but whose offer in Piazza Affari is rather limited. There is always the hope that small and medium-sized Italian companies can once again reinvent themselves, probably in certain sectors such as luxury, where there is room to manoeuvre. The problem is that, year after year, it is more and more difficult to achieve this exploit in Italy because of the multiple constraints on entrepreneurship. The attractiveness of moving factories and laboratories outside of our country grows with the increase of obstacles due to fiscal, legal, and bureaucratic uncertainties. So far, Italian entrepreneurs have always managed to invent something new, and hopefully this time too, creating new business opportunities.
But, even in these cases, it has always been about market niches. Why is that?
This is a problem that does not only concern Italy. Compared to the American economy, the European economy is still very much focused on the banking system. It is a question of a different strategic vision that puts the United States at the top, strong in a private financing system alternative to the banking system, with investors willing to wait even years and several loss-making balance sheets in order to gain world leadership. In this context, Europe, and therefore Italy too, is relegated to an ever-more marginalised position in the global panorama.
Could the European Green Deal be an opportunity for redemption for the Old Continent?
In an environment where demand is likely to stagnate, the European Green Deal can be an important programme of public interventions on a European scale. In the short term, there could be a setback due to the sharp drop in oil prices. However, in the medium term, the roadmap to make the EU economy sustainable, turning climate and environmental challenges into opportunities in all sectors, is feasible and could certainly involve many companies in our country.
Interview with Massimo Trabattoni, Head of Italian Equity.