No matter where we look, data points suggest this is blown out of proportion and the situation will normalise. Equity markets and especially many individual stocks look very attractive at these levels especially since we are not forecasting a global recession based on the incoming macro data.
In our view, we are getting very close to the capitulation point before a rebound. Given the hard selling, many valuations have changed and as a result we have just run our code again behind the Global Alpha Picks. Here are our top three picks across regions – the full list is attached.
Michael Kors is a strong value play, still growing top line, with 66% revenues from the US and 33% from Europe, forward P/E 8.2x
Nissan Motor is the cheapest of the major carmakers and, while the turnaround in the US is weighing, the Japanese carmaker hasone of the highest sales growth rates in the industry.
Ryanair's stock is cheap given its year-on-year sales growth of 17%. It is benefitting massively from lower oil prices through lower costs and more travel activity driven by higher disposable income
Love 'em or loathe 'em, Ryanair continues to pack those planes to the rafters. Photo: iStock
Home Depot is benefitting from rising US home prices which are expensive relative to historical valuations. There is also a strong uptake in online sales lowering costs (expanding margins), with massive buybacks supporting the stock price ($7B announced)
Activision Blizzard has cheap valuation (P/E 20.4x) given strong growth and strong cash flow generation while headwinds from the stronger USD should fade in 2016.
VeriSign i enjoying a tailwind from analyst upgrades, the strong need for IT security and a fantastic business model that is generating a 35% profit margin after tax).
Denmark's Vestas has the strongest growth in many years on the back of its better mix between post-service and turbine sales, record order book, attractive valuation given outlook and massive global government support for renewable energy
Swedish Match is a good defensive play which could get a big gain from a Scandinavian Tobacco IPO in Copenhagen, high valuation, strong cash flow generation, top line growth
Volkswagen's diesel scandal is slowly fading which should see investors returning to fundamentals for what still remains one of the strongest players in the industry with multiple brands and very cheap valuation
Is now a good time to pick up Volkswagen? Photo: iStock
— Edited by Martin O'Rourke