Bernstein names its top European stock picks — and gives 4 more than 50% upside
Bernstein has identified a handful of European companies as top stock picks, with four showing potential gains of more than 50%. The stocks named span diverse sectors, from recreational vehicle manufacturing to semiconductor production, reflecting Bernstein’s confidence in various European market segments. Bernstein believes the decline in this particular European stock market segment appeared to have bottomed out. “MSCI Small Caps staged an impressive and consistent outperformance vs Large Caps over a period of over 10 years, peaking in September 2021, followed by two years of a marked underperformance, troughing at -30%,” said Bernstein analysts led by Aleksander Peterc. “Over the past year, small caps appear to have bottomed out (or at the very least stabilised) relative to large caps.” Durr Bernstein picked German engineering firm Dürr for its promising growth outlook and reasonable stock price. The company, which provides automation and energy efficiency services, is expected to benefit from several industry trends, including the shift to electric vehicles and increasing demand for sustainable construction materials. The investment bank said Dürr’s poor stock market performance this year despite steady growth is another reason for its pick. Dürr is expected to rise the most among Bernstein’s favorites at 38 euros ($41), up 80% over the next 12 months. Ipsos Market research company Ipsos made the list given its expected recovery in the United States from 2025 onward. Bernstein also highlighted that the stock was attractive because it had raised its margins from 10% in 2019 to 13% in 2023. The company, which ranks third globally in market research, has faced challenges in its U.S. business because of reduced spending from technology clients and pharmaceutical companies. “Although Ipsos is affected by the weak macroeconomic climate, we believe its operations should prove resilient, allowing the group to maintain its operating margin at around 13%, while generating a solid [free cash flow],” the Bernstein analysts said. Shares are expected to rise to 79 euros, or 68%, over the next 12 months, according to the investment bank. Soitec The French semiconductor manufacturer is among the most technically advanced companies in Bernstein’s stock list, with what the bank calls a “potentially compelling AI story.” The investment bank believes Soitec ‘s Photonics-SOI product, semiconductors that transmit data at high speed, currently makes up a small percentage of the company’s total revenues, which it says could grow “meaningfully” by up to 40% each year “as demand for high-bandwith data centre optical interconnects grows in step with high-performance AI/ML clusters used in [AI model] training.” Soitec’s shares are expected to rise by 65% to 130 euros a share, according to Bernstein. Trigano French motorhome maker Trigano stands out for its exceptional cash-generating ability, according to Bernstein. “Producing recreational vehicles does not require any major investment for Trigano,” the Bernstein analysts note, highlighting the company’s strong financial position with approximately 300 million euros in net cash as of August 2023. Bernstein expects shares to rise by more than 52% to 119.40 euros. — CNBC’s Michael Bloom contributed reporting.
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