Catching the Wave: Goetz Albert Discusses the Upcoming Boom in German Small and Mid-cap Stocks
By Werner Ruppel, Frankfurt
"Current Moment Favors Subordinate Values"
Mr. Goetz Albert, CIO of Lupus alpha, sees a massive wave coming for German Small and Mid-cap companies, and he's not just talking about a simple ripple. This wave is a tsunami of opportunities in the defense and infrastructure sectors.
In the past few years, Large Caps have dominated the German stock market, leaving the MDax and SDax stocks in their wake. However, according to Goetz Albert, this is about to change, and quickly. "If you look at the market valuation now compared to late 2021, it's like night and day," he explains to Börsen-Zeitung.
Defense stocks, such as Rheinmetall, are undergoing a transformation, from being just a good investment to becoming a gold mine. "Since the start of the Ukraine conflict, the defense industry has taken on a whole new meaning," he says. "And Europe is in a serious pickle when it comes to defense without major American support."
The German government is stepping up to the plate with significant funding packages for both defense and infrastructure, totaling 500 billion euros. "International investors are scratching their heads, wondering how Germany can do this," Albert jokes. "But we can, and we will."
These investments will be a game-changer for the entire German economy. "Money is like a stimulus package for our industry," predicts Albert. "It will have a positive multiplier effect across all sectors."
Germany is not just a powerhouse in traditional industries like cars; it's a global leader in defense technologies. "We are ahead of the curve in autonomous drones and new military technology," Albert reveals. "And if you look at companies producing engines and lubricants for tanks, well, those traditional industries will see a major boost too."
European Small and Mid-caps are currently undervalued with a forward P/E ratio of 12, compared to Large Caps with a P/E of 15. "Years ago, these small companies were over-valued," Albert explains. "But not now. Now is the time for Small and Mid Caps."
The outlook is not just financial; it's an opportunity for global security and stability. "We have the chance to rebuild our defense capabilities, to secure our nation, and to make a real difference," he says. "That's something worth investing in."
Enrichment Data:
Overall:
Small and Mid Cap German stocks, particularly those in the defense and infrastructure sectors, are poised for a resurgence in 2022 due to various geopolitical and economic factors. Russia's invasion of Ukraine has led to increased defense spending, as well as an EU-wide rearmament and infrastructure modernization program. As a result, multiple companies in these sectors, such as Rheinmetall and Hensoldt, have seen significant growth in share prices. Moreover, due to these investments, Germany is aiming to expand its defense capabilities and technology to strengthen its position on the global stage.
Geopolitical Catalysts:
- Russia’s Invasion of Ukraine: The full-scale Russian invasion in February 2022 sparked a dramatic upswing in European security policy, with Germany shoring up its military capabilities.
- NATO and EU Coordination: European countries have collaborated on substantial funding initiatives, such as the €150 billion loan program for rearmament and a potential €800 billion defense spending package, and NATO members have set new targets for defense expenditure.
Sector-Specific Drivers:
- Defense Stocks: Companies like Rheinmetall, Renk, and Hensoldt have seen impressive share price rallies, fueled by investor expectations of increased government spending and export demand for advanced military technologies.
- Infrastructure Stocks: As governments seek to modernize critical infrastructure, both for civilian and military needs, infrastructure stocks have also gained traction.
Market Dynamics:
- DAX Performance: The broader German DAX index has flourished as a result, with defense and infrastructure Small and Mid-caps significantly outperforming.
- Export Opportunities: Increased international demand for German defense and infrastructure solutions, combined with favorable export conditions and policy support, has further fueled growth in these companies.
- The defense and infrastructure sectors in German Small and Mid-cap stocks are experiencing a significant surge, as international investors recognize the potential for growth due to increased government spending on defense and infrastructure projects.
- In the wake of geopolitical tensions, particularly Russia's invasion of Ukraine, and the resulting focus on European security and rearmament, companies such as Rheinmetall, Renk, and Hensoldt have seen their share prices rally, signaling a promising outlook for the defense industry.
