The Trompe L’oeil Of The Eternal Cheap ‘Peres’

The beginning of the course after the summer leaves us with a photo very similar to that of previous years, the large companies of the Spanish stock market buy cheaply compared to their profits. However, what is cheap is not always profitable, in the same way that the money of the poor goes twice to the market compared to the rich who can buy things of higher quality.

The intention of empirically testing whether cheap is more profitable is the reason why at elEconomista we have proposed to face the portfolio that today can be built by lower profit multipliers of the Spanish stock market compared to the one that is bought more expensively. Theoretically value versus growth. The problem is that if a company is historically always cheap by PER – the number of years that the share price picks up its earnings – it is a trompe l’oeil of value. And of those there are quite a few examples in our market.

Talking about cheap peres indefinitely causes the disaffection of many investors and ends up being like those translations that are made to be buried in official documents. Javier Marías, in Corazón tan blanco, explains it as follows: “Any idiot that any idiot spontaneously sends to international organizations is immediately translated into English, French, Spanish, Russian, Chinese and Arabic. Perhaps nothing will be done with them. , but it is translated “.

It is translated as systematically speaking of a certain company because of how cheap it is per PER, for one year from now and the next to continue to be cheap.

If the current Ibex profit multiplier is 16 times, within the index we find that a dozen firms are trading below 12 times. And not all of them have to be labeled cheap.

Among these are the banks, Telefónica and Repsol – the electricity companies do not – and it must be remembered that the photo with which the beginning of the year starts is not very positive. Among the fifteen largest European banks, Santander and Caixabank remain in the middle of the table of the best recommendations, seventh and eighth, while BBVA is eleventh. In the case of Repsol it goes to the bottom, twelfth oil company. Among electricity companies, Iberdrola and Endesa are also at the bottom, tenth and eleventh.

And in the telephony and communications business, Telefónica occupies a lackluster twelfth position. It should not be surprising that the title that has created the most value for shareholders in recent years, Cellnex, is the third in the sector. Its growth story is fast-paced after having completed the largest capital increase in remembrance this year, of 7,000 million euros. Only Vodafone and Deutsche Telekom, one of the latest additions to the Eco30 Stoxx, improve their recommendation.

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