Editor’s note: This article was first published in April 2013. All price levels, supports and targets are from that month: Banco Popular at 0.52-0.62 euros, Sacyr between 1 and 2.40 euros, and Ezentis at 0.12-0.145 euros with an expected gain of more than 50% for 2013-2014.
Within the IBEX 35, Sacyr Vallehermoso and Banco Popular are two of the most bearish stocks (with apologies to ArcelorMittal). Betting on them is betting on an economic recovery, and when that moment comes they would be two of the stocks with the most return to offer, far above the blue chips. Of course, Popular, Sacyr and Ezentis are all going through technical difficulties right now, so the task is to find the safest possible entry zone. Let’s look at each one in turn.
1. Banco Popular
After losing the €0.62–0.60 zone, the stock could be pushed down to the €0.53–0.52 zone, where those who missed the chance to take part in the capital increase could get their opportunity to buy in. Needless to say, losing that zone could send the stock who knows where, although that should not happen.
If we are talking about an economic recovery, we should not rule out seeing Banco Popular at €0.90, and over time I am sure it will trade above one euro per share. The short-term complication would be the uncertainty over whether banks need new provisions, since that could hurt their profits again when they present their accounts. The logical outcome is that we will soon see Banco Popular at €0.78, which would be a 30% gain. In times of economic uncertainty, Popular will probably lead the falls, and in a recovery, as one of the most battered stocks, it will lead the gains.
2. Sacyr Vallehermoso
Sacyr’s problem is its rather bitter fundamentals, caused by its high debt. As we have said on other occasions, Sacyr will probably follow the same path as Gamesa and climb above €2.40; but if it loses its support around €1.20, we could see it at one euro again. If the economy starts delivering good news and the IBEX goes along with it, Sacyr could gain more than 50%. The investment strategy would be to keep accumulating the company’s shares every time it drops below €1.40, the closer to €1.20 the better, with the long term in mind. It is a risky investment, although it can be a very profitable one.
Note: a few months ago I asked a group of investors, “Which IBEX company is most likely to go bankrupt?” Sacyr won with 80% of the votes. Although we doubt that will happen at this stage, it is something we should always bear in mind.
3. Ezentis
After losing €0.145, we could say the stock will be taken down to €0.12, the zone where, technically, buyers should start coming in, although, as we have said before, this stock will be driven by its fundamentals, which we hope will keep improving. If it loses €0.12, we would have a technical problem. This company is still my big short-term bet, and I just hope there will not be many more capital increases and that the good figures we are waiting for start to arrive. The gain I expect from this company is well above even 50% for 2013–2014, although you have to be aware of the risk.
By betting on these three stocks and buying within their safety zones, you can beat the market by a wide margin. Of course, that means being willing to take on the risk, because make no mistake, the risk is there. But as you know, the higher the risk, the higher the return, if it goes well, of course.
Featured image: Álvaro Ibáñez from Madrid, Spain, CC BY 2.0, via Wikimedia Commons.
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