How to invest in times of war and high inflation? The first rule is not to panic, even because the stock market is not going through a phase of "generalized descent", but rather one of "structural rotation”, bringing back some sectors that have been neglected for many years. That's what he writes Alessandro Fugnoli, strategist of Kairos, in thelatest episode of his monthly podcast “Al quarto piano”.
What is the "old economy"?
According to the analyst, investors must not overturn their portfolios, but update them in the name of prudence, with balanced choices. And this means recovering interest in what is defined oldeconomy, but which in reality does not include only traditional sectors. Rather, these are sectors “with a high capital intensity – explains Fugnoli – which have seen in the last decade a chronic scarcity of productive or financial investments and they generated a low return on capital".
Why is it attractive again in the eyes of investors?
Dynamics that over time have led “to the exit from the scene of less efficient subjects et al consolidation” of the sectors of oldeconomy "in the hands of very few large corporations better equipped to survive in a difficult environment”.
The result is a high pricing power, that is, not only a large capacity of pass cost increases downstreambut also the possibility to grow profit margins”, continues Fugnoli. This is why now "the stock exchanges are observing the low multiples" of the companies that survived this process of natural selection "with fresh eyes and renewed interest".
Which sectors are part of the old economy?
But which sectors are we talking about? In the first place, the production of raw materials: from fossil energies to industrial metals, passing through agricultural products. But then also the chemical industry e the food one. In all these sectors, “the low investments and the pandemic before, the war and sanctions later, they provoked a structural reduction of supply in front of a question that has continued to grow”, underlines the Kairos strategist again.
US companies are safer than European ones
Certain, "you have to be selective – concludes Fugnoli – American companies, which enjoy a lower cost of energy and are less exposed to the risk of supply interruptions deriving from wars and sanctions, start out favored compared to European ones”.
