Investing in stocks: Opportunities haven’t been this good for a long time

Dhe Dax had a very lively October. It went from less than 12,000 points to more than 13,000 points. As soon as the gas price falls a little and the thermometer rises, some investors already get spring fever. A last gasp of the markets before a nasty winter? Or the turn to the next bull market? Buy now or would you rather use the ten percent price increase to exit?

Disappointing news in advance: The crystal ball for the further development of the Dax has still not been found, neither in the FAZ editorial office nor in the Frankfurt or New York bank towers.

However, as always, the magnifying glass helps. This allows some things to be looked at more closely, for example the free cash flow, the free inflow of funds, i.e. the money that actually arrives in the company’s coffers, can be found in the columns of figures. The most honest indicator, according to Christian Kahler, who has been an equity strategist for many years and has managed his own equity fund Kahler&Kurz since August. Operating profit figures such as EBIT and Ebitda can be calculated a little or poorly, depending on requirements, and the bottom line profits are often subject to strong fluctuations. “The cash flows are more stable, more reliable and more likely to show the true earning power of a company,” says Kahler.

If he looks at the market, it is cheaply valued on the basis of this indicator. “We are currently about 20 percent below the average since 1990,” says Kahler. His conclusion: “We are a long way from bargain markets like in 2009, but the companies are in a much better position than they were during the financial crisis.”

The ranking of companies with the highest inflows of funds in the world shows Apple, Microsoft and Alphabet/Google at the top, i.e. also the most valuable companies in the world. In Europe, the oil company Shell is in the lead, ahead of the Swiss pharmaceutical companies Roche and Novartis, and in Germany Telekom.

In order to be able to draw sensible conclusions from the figures, they must be placed in relation to the company’s value. This is the only way to see what the stock exchange has already priced into the current prices and where there may still be room for improvement. The list is so scrambled and at the top of the list in Europe is Stellantis, the French car company under whose roof are Peugeot and Citroën as well as Chrysler, Fiat and Opel. The company’s value on the stock exchange is only 1.6 times greater than the free inflow of funds. Or to put it another way: With two annual inflows, more money comes into the till than the company is worth on the stock exchange.

An unusually favorable constellation, as can also be found with the German car manufacturers Mercedes (2.4) and Volkswagen (3.8). Energy and oil companies follow, such as Italy’s Eni and France’s Total, BMW, Deutsche Post and Telekom, but also the Dutch supermarket chain Ahold Delhaize, the French infrastructure group Vinci and Germany’s FMC, Siemens and Qiagen.

Better invest in the fog

Kahler sees the stock exchanges in a bear market that could bring new lows in the fourth quarter. “However, the following still applies: Invest before the fog has lifted. When the sun shines, it’s usually too late and no longer cheap,” says Kahler. In his new fund, he relies on strong brands and companies in good competitive positions such as Deutsche Börse, Munich Re, LVMH and Unilever.