Editor’s note: This article was first published in November 2012; the broker favourites, share prices and targets, the IBEX at around 8,200 points, Popular’s rights deadline and the bank stress tests it mentions all refer to that time. The three stocks recommended here later collapsed. Bankia needed a public bailout and its shareholders lost most of their investment in the 2013 recapitalisation; Abengoa sought protection from its creditors in 2015 and its parent company filed for insolvency in 2021; and Banco Popular failed in June 2017 and was sold to Banco Santander for one euro. This article is kept as a historical record and is not investment advice.
What are brokers recommending today? The companies they like are Telefónica, Santander, Iberdrola and Inditex. Good businesses, solid companies, and three of them (all except Telefónica) pay good dividends. In short… a real treat. But… I think the savoury side is going to be more profitable in the short term.
Looking at these companies, I wouldn’t rule out medium-term gains taking Inditex to €105 a share (+5%), Santander to €6.20 (+8.5%), Iberdrola to €4.40 (+10%) and Telefónica to €11.50 (+13%). If those prices were reached, which is possible given the time of year, that wouldn’t be bad at all. Of course, we should work out whether what we want is to invest for the medium or long term or to make money in the short term.
In the short term, as things stand today and in my view (a purely speculative view), we could make a smart investment or choose to make money. So, although nothing is ever certain on the stock market, and without this being a recommendation, I would pay more attention to other stocks that can give us a bigger return in days or weeks than the famous favourites will in a year.
Bankia.
Bankia is the IBEX’s prostitute: nobody wants to marry her, but we like to take advantage of her. Bankia has been holding at around €1 for quite some time, and if it doesn’t lose that level, the stock will soon head upwards, even if only in one of those speculative rebounds we are used to seeing in this stock. In a few days Bankia could head towards €1.20 or €1.30, which would basically be a 20% or 30% rise. It’s a risky investment that we can control by placing a stop-loss at €0.98; if it lost that level, it would be a matter of waiting for it in the €0.90–0.93 area. If it lost that level as well, it could easily head towards the €0.50 area, its lows.
However, if the stocks mentioned above meet the expectations described, we would be talking about an IBEX at around 8,200 points, and so the most likely scenario is that Bankia will turn upwards rather than downwards. Always keeping an eye on what happens with the stock, because it is not without its surprises.
Abengoa.
Abengoa appears to have finished its correction and, as we said in a previous article, buying would come in around €1.80. After two days of strong gains, be very careful, but in principle I would say this stock is entering a gradual recovery, and we don’t rule out a 50% gain in the medium term. Personally, today I placed my stop-loss at €2; if it were to lose that level, the outlook would become complicated again.
Banco Popular.
Patience for now, but buy the rights to the capital increase before 28 November. I’m surprised to see the experts advising people not to take part in the capital increase. My advice, without a doubt, is that if you are not a shareholder, I consider it an excellent investment opportunity. In this case, though, for the medium to long term. And if you are a shareholder, I think the advice to sell your rights to make money is sound. It’s sound, although you might be making a mistake, because Popular will probably end up rising, and you could miss an excellent moment to recover part of the return you have lost on the stock.
I can’t believe they compare Banco Popular with Bankia. Nobody denies that it hasn’t been well managed or that the capital increase is a screw-job (pardon my language) for the current shareholders, but even supposing that, once the capital increase is over, the share price heads to €0.41 (possible but unlikely), I don’t think it will take long to start recovering. Banco Popular is a good bank, and it even passed all the stress tests except one, and that one with doubts.
One clear difference I see between Popular and Bankia is that we are all paying for Bankia, whereas Popular has looked for a way to finance itself with its own resources (although I know it’s a nuisance for existing shareholders). Of course, banks will be banks.
These are my three favourite stocks for Christmas (except Popular, which would be for the longer term). They aren’t the most recommended stocks, but at the end of December or the beginning of January we can compare returns.
Return lies in risk, and in this case I personally think this risk is worth taking: a risk that is controlled by placing stop-losses.
Featured image: CarlosVdeHabsburgo, CC BY-SA 4.0, via Wikimedia Commons.
