Asset manager names one under-the-radar market to buy when times are bad, giving 6 stock picks
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Concerns over worsening geopolitical tensions, volatility in corporate earnings and uncertainty on when the U.S. Federal Reserve will cut interest rates have sent some investors on the hunt for safe-haven assets — and markets — to put their money in. One European index stands out to portfolio manager Carla Bänziger even in a falling market, thanks to the “decent valuations” of its large and small- mid-cap stocks right now, and that’s Switzerland. “People recommend investing in the Swiss market during uncertain periods – like if you are expecting a recession. For retail investors, I think it would make sense to always have part of their investments in Swiss equities to balance out any volatility in the market,” Bänziger, from the Zurich-headquartered investment firm Vontobel, told CNBC Pro in January. Switzerland’s benchmark Swiss Performance Index is up 0.85% year to date, after logging gains of 0.95% in the past year. In contrast, the benchmark S & P 500 Index is up around 4% year to date, after a 24% rise in 2023 . “Maybe in a bull market, Swiss equities are not going to be a huge outperformer globally — but they can generate positive returns. At those times, you might want to invest more in emerging markets or other assets. But in difficult times, Swiss equities, besides the U.S., is one of the markets to buy,” Bänziger said. The portfolio manager oversees around 890 million Swiss Francs ($1.02 billion) in Swiss equities. In her view, Swiss stocks benefit from the strong Swiss franc and a political system that fosters innovation in companies. Bänziger’s optimism on Switzerland comes even as its economy is expected to grow “well below average” at 1.1% this year, in light of economic risks such as a slowdown in Germany and China and higher interest rates dampening demand for Swiss products, according to the State Secretariat for Economic Affairs. Stocks to play Nevertheless, Bänziger is optimistic on the stock market, naming reinsurance company Swiss Re and real estate players Swiss Prime Site and PSP Swiss Property as her top three stocks. Referring to Swiss Re, the portfolio manager noted that the company has “a good business dynamic.” “We believe that this is going to translate through to the earnings and an increase in dividends – which is very important for investors in the insurance sector,” she said, adding that the company’s “valuations are now quite attractive [while] the fundamental business is still very solid.” Swiss Re’s shares are traded on the SIX Swiss Exchange, and take up 1.8% of the iShares MSCI Europe Financials ETF . Meanwhile, Bänziger believes Swiss Prime Site and PSP Swiss Property make good investments among small- and mid-caps, given the opportunities in the Swiss real estate sector. With real estate markets being “strongly negatively co-related to interest rates,” she believes that both stocks stand to gain since economists anticipate Switzerland to have one — possibly two — rate cuts this year. With the properties that both stocks cover being in the city center, Bänziger also expects vacancy levels to remain low. As such, she believes “these stocks have re-valuation potential with declining interest rates and are also more defensive than the general market if a recession hits.” Swiss Prime Site and PSP Swiss Property are in the SPDR Dow Jones International Real Estate ETF, taking up 2% and 1.5%, respectively. Other stocks on Bänziger’s radar include chocolatier and confectionery company Chocoladefabriken Lindt & Sprüngli , engineering company ABB and sanitary parts company Geberit. When asked how to allocate between large and small mid cap Swiss stocks, the portfolio manager said, “If we are heading into a down cycle, investors may want to switch their allocation more to the large caps like Nestle , Roche and Novartis . But in a bullish market, we have had a lot of success investing in small and mid cap sector … The share price return is more moderate, but steady, but we have a lot of small companies that can have very nice returns and very nice growth rates.”
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