Editor’s note: This article was first published in September 2013, when the war in Syria was a risk for markets; the IBEX level, company debt, share prices and price targets it cites are from that time (the Inditex prices predate its five-for-one share split in 2014). These buy and avoid calls date from September 2013 and are kept as a historical record; they are not investment advice. Several of the banks and companies mentioned later collapsed or were rescued.
I’m taking it for granted that the IBEX should fall again, if not because of the war in Syria then because of other factors. For now, though, technically, and even if it makes no sense, we could see it heading towards 9,000 points, which, at the risk of being wrong again, I would still see as a false rebound.
In the event of a major fall, I would advise even those who don’t understand the stock market to start building a portfolio of solid stocks with a long-term view that pay us good dividends. If there were further sharp falls, and always remembering that we would be in it for the long term, I would take the opportunity to average down.
See also: 5 steps to build a dividend investing strategy
Although we still have a lot left to analyse, among the companies we have already studied there are some we would rule out completely for a long-term portfolio and others that would suit investors with a low-risk profile.
Among the ones I’d rule out would be Repsol because, as I’ve said before, any IBEX 35 company has more upside potential than this one; Telefónica, because although I don’t rule out it returning to €15 at some point in the future, I personally have no intention of putting a company with 50 billion euros of debt in my portfolio, however much of a blue chip it may be; and FCC, a company that, unless we are already in and have been for a long time, is best left alone. FCC may reach €19 or perhaps more, but at €14 it is already overvalued. And certainly our textile locomotive (Inditex), a company that, even if our colleague Victoria Bernal’s expectations (150 euros per share) came true, I wouldn’t buy at €100 a share, although anyone who invested in it years ago has no reason to sell either.
*With Bankinter, I honestly wouldn’t know what to do, because it keeps putting up a strong bullish fight and could have good potential. On that stock, let everyone decide for themselves.
The Spanish market
Having ruled out these stocks (always from our point of view, which may be right or wrong), in the event of a fall in the IBEX I would look at Iberdrola, a company that is a great buying opportunity if you get the chance to snap it up well below €4. I would look at CaixaBank, which I regret not putting in my portfolio when it touched €2 a share. And I certainly wouldn’t forget Banco Santander. I know people now say they prefer BBVA to Santander, but over time Santander will be the favourite again. And with the long term in mind, I wouldn’t forget Acciona, because I think this company could reach at least 50% of the share price it reached before the crisis.
At what prices should you buy these companies? The cheaper the better 🙂
Diversifying with the US market
If we want to diversify with stocks from across the pond (Wall Street), we could start with Microsoft, because everything suggests that Bill Gates’s company is going to take on the giants in new markets, where Microsoft has a lot of ground to gain while the giants have a lot of market share to lose to their new competition.
I would consider a company we should have considered much earlier: Berkshire Hathaway’s Class B shares, which have been on an unstoppable upward run, and everything suggests they will keep going.
Nor would I lose sight of billionaire Leon Cooperman’s favourite stocks, which could give us excellent diversification.
Clearly, if prices allow it again, I would look once more at getting into Popular, Abengoa and Sabadell, especially Popular and Abengoa.
There is still a lot to analyse, in both the US and Spanish markets, but as I said, I think that for a low-risk profile, with a long-term view, investing for dividends and with a mindset of averaging down on the falls, these stocks offer a worthwhile risk-return balance ahead of a recovery in the global economy.
See also: Charlie Munger on diversifying your investments
Featured image: Eric Titcombe, CC BY 2.0, via Flickr.
