Editor’s note: This article was first published in February 2011. It contains stock picks and forecasts for 2011, covering Ferrovial, Sacyr Vallehermoso, ACS, Telecinco, Banco Popular and others. Banco Popular was later sold to Santander for one euro (2017), Telecinco became Mediaset España and Sacyr Vallehermoso is now Sacyr.
Today I came across an article on expansion.com (the Spanish financial daily) titled “Stocks that could rise more than 30% on the Spanish stock market“. My opinion is clear and blunt: “It’s nonsense”. If someone who is thinking of investing in the stock market reads that article and takes it as investment advice, they could be in for the surprise of their life.
We’re back to the same old story: stock analysts make their predictions based on their chart analysis and don’t take into account the factors that technical analysis can’t deduce. Let’s call it the common-sense factor, or the factors that may crop up over the course of 2011.
The article recommends investing in construction companies such as Ferrovial, Sacyr Vallehermoso and ACS, which could gain more than 40% until they reach the valuation estimated by the experts. My question is: “Will they stop calling themselves experts when those shares fail to reach the forecast prices?”
With upside of more than 30%, they point to Telecinco, Vidrala, Popular, Duro Felguera and Inditex. Analysts expect very good results from the TV network, with a 31% increase in revenue in 2010 and a 36% increase in net profit.
I’ll stop at Telecinco to point out that it isn’t going through its best moment. Of this group, the only one that could make the “upward” run of more than 30% is Banco Popular.
The thing is, these are stocks that could rise 30%, but… over what time frame? Two years, five years, ten years? Honestly, I don’t think any of the stocks named will rise 30% during 2011. My opinion is on record here, and we’ll finally be able to see where the “experts'” technical analysis goes wrong.
I would have given that article a different headline:
Stocks that could rise 30% or fall 15% or more, if Portugal needs a bailout or the markets’ distrust of Spain gets worse.
So we have two sets of investment advice, which we’ll leave on record to review later:
- Investing according to technical analysis. The most profitable stocks according to the experts’ analysis. Source: Expansión.com
- Investing according to common sense. The most profitable stocks, from our earlier article.
Featured image: Discasto, CC BY-SA 4.0, via Wikimedia Commons.
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