Summary
Let’s discuss three investments that offer what our European insider sees as excellent 2022 potential.
They’re all sporting undervalued share prices compared to even conservative estimates for the coming years.
Our insider owns all three and I’m considering all of these myself.
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ugurhan/E+ via Getty Images This article was coproduced with Wolf Report.
Let’s look at several international companies that European insider Wolf Report – our newest addition to the iREIT on Alpha team – believes can make excellent investments for conservative dividend-oriented portfolios.
We’ll explore some excellent opportunities with double-digit, market-beating upsides. All three are companies Wolf Report owns. And all three are, in his view, significantly undervalued against both short-term and longer-term expectations.
Now, there are multiple reasons to invest in European companies right now. Admittedly, market-beating yields isn’t one of them. But conservative should still know: They’ve lagged the overall global recovery. Many of them are still significantly undervalued compared to the Nasdaq, S&P 500, and even European indices. Germany and France stand out especially in this regard, partially due to extended lockdowns.
There’s a diverse range to choose from. Decades ago, you could argue that European stock markets were too very heavy on old-school financial banks, large state shares, and national energy companies. And that’s still arguably true of Italy. But, overall, Europe’s tech sector is now twice the size of banking. And consumer staples make up a significant size of the MSCI Europe index too. The continent has changed, to say the least.
Europe is home to some of the world’s most valuable companies. In addition to the aforementioned banks and tech companies, there are massive industrial conglomerates and chemical majors, to name a few more. The pickings are nearly as endless as in the U.S.
As such, selecting so few names is challenging – which is why iREIT’s version of this article includes two more company names along with… Orange Might Look Good on Your Portfolio
(Source: Orange)
Let’s start with French-based Orange ( ORAN) , one of the fundamentally safer and larger telecom companies on earth. It features a well-covered dividend and what Wolf Report sees as an appealing: Legacy
Potential portfolio growth areas.
While there were reasons behind it original stock price fall – and large amounts of capital expenditures have both been spent and remain to be spent – he sees Orange as having conquered much of its risks.
Wolf gives it an annualized upside of around 10%-11% on the lower end and upwards of 20%-40% on the higher.
Recent results indicate that its previous COVID-exacerbated revenue declines have peaked. The market currently disagrees with that assessment, but that works for us. (Source: Wide Moat / AlphaValue)
As is, we do have to acknowledge that there are no clear catalysts for revving up valuation in sight. But Wolf Report says he’s content investing in Orange’s “absolutely solid value and quality” in the meantime.Its estimated 2021 native yield is over 8%. And earnings before interest, taxes, depreciation, and amortization (EBITDA) is over €14 billion, which should improve in 2022. (That’s to say nothing of its TOTEM towerco subsidiary, which Wolf Report values at well above €5 billion.) Orange offers a better yield and lower valuation than its peers… investment-grade credit, and an appealing legacy-growth market combination. Even based on its current 10.4x price-to-earnings (P/E) and without any expansion in that area at all, its forward upside is still 22% annualized. (Source: FAST graphs)If it went up to 14.7x, new investors’ returns would be 43% annualized until 2023 (based on reversal possibilities). That’s not likely short-term, but it could happen further out.Wolf Report considers Orange’s conservative price target to be €12.6. And that would give it a 27% upside based on current estimates. HeidelbergCement: A Concrete Investment (Source: HeidelbergCement)Next up, we have HeidelbergCement ( HDELY ), one of the largest cement/concrete businesses in the entire world. It’s also a producer of one of the primary resources needed for further urbanization.That’s important considering how 75% of the human population is expected to live in cities by 2050.While it does face some headwinds related to its specific business model, Heidelberg has a history of weathering most conditions.This company’s upside potential comes from its depressed overall valuation despite good results and expected improvements in 2021. Plus, earnings per share is expected to improve along with overall fundamentals over the next few years.And Heidelberg has kept its dividend in place, […]
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