There have been two companies that have exceeded expectations in their business results in the first quarter of the year at very complex times due to the effects on the expansion of the coronavirus. These listed companies are Endesa and Repsol, which have improved their results against the current of other companies that make up the selective index of equities in our country. For example, Inditex and in general all the banks that have recorded a drop in their results and that is an indication of the terrible effects of this virus in the economic and business sector of our country.
The results achieved, both by Endesa and Repsol, have served to ensure that their shares have appreciated in the financial markets in a very intense way. With appreciations of 4% and 13% on their original prices with the entry of new small and medium investors with the goal of making their savings profitable in a very difficult time for investing in the stock market. In this scenario, it can be two values that do better than the rest from now on due to the trust they have generated among the various financial agents. And what is more important, at a time when the coronavirus has caused a brutal decline in the Gross Domestic Product (GDP) of our country.
While on the other hand, it cannot be forgotten that in both cases there has been a notable improvement in its technical aspect. With an upward trend in regard to the long term and therefore invite new inflows of monetary flows to take place from now on. Very striking in the case of the oil company when the price of crude is at historical lows by trading below the $ 20 each barrel. After the collapse in their rates after the increase in their production in recent weeks and that has led to uncertainty in all the financial markets of the world. Coinciding with the economic decline in all the economies of the world, where the decrease is a fact.
Endesa and Repsol exceed expectations
In either case, the most significant thing about their business results is that they have been above the estimates of the experts. And therefore, it has been a very positive surprise for small and medium investors who have found values that they can act as a refuge in the current circumstances. Given this scenario, it is not unreasonable that these proposals on the stock market could be revalued in the coming months of this second quarter. To the detriment, for example, of banks, which are in a situation of free falls and that they are very unsuitable for opening positions in international equity markets. In a change in the strategies of the users regarding their investment portfolio to make their available capital profitable.
On the other hand, it is also worth highlighting the fact that these two stock values have seen a reduction in the falls that they had accumulated since the first weeks of March. From where they depreciated in both cases at levels above 30%. And in some way helped by the fact that the European Central Bank (ECB) has once again shown that it is willing to help the economies of the countries most affected by the expansion of the coronavirus. Where Repsol has been one of the most affected in its valuation on the stock market, going in a very short space of time from 12 euros to 7 euros. With a cut of almost half on its original price.
Repsol, decrease of 27%
In the first quarter of 2020, Repsol achieved an adjusted net result of 447 million, which represents a 27,7% decrease compared to the 618 million for the same period last year. This result, which specifically measures the behavior of the company's businesses, was obtained in a context of exceptional complexity, marked by a sharp drop in oil and gas prices, and the drastic decrease in demand caused by the COVID-19. XNUMX. Repsol kept its facilities active and played an essential public service role in the global health crisis.
On the other hand, the company's integrated business model, together with its flexibility and resilience, were essential for its businesses to achieve a solid result in this very adverse scenario. The average price of Brent and WTI crude oil decreased by 21% and 17%, respectively, compared to the first three months of 2019. At the end of the quarter, Brent was trading below $ 20 a barrel. In the case of gas, the declines were even more abrupt, with falls ranging between 36% in the case of the Henry Hub, and 56% in the Algonquin.
Improvement in your dividend
In any case, the national oil company of reference has now achieved that its revaluation potential is much more suggestive than just a few months ago. While on the contrary, it has raised the profitability of its dividend by a few percentage points. Being in any case one of the stock securities that offers a more powerful interest rate to small and medium investors. As an additional incentive so that their shares can be contracted by small and medium investors. With a performance that is very close to 9% levels, well above other proposals in the equity markets of our country.
On the other hand, it cannot be forgotten that this company has been greatly affected by the high decrease in the price of crude oil. To the point that this matter has reached levels below the barrier of $ 20 per barrel. In this context, Repsol's business line may be adversely affected in the coming quarters as a result of this tough situation that this financial asset is experiencing. Where there are not few analysts who believe that the old prices will take a long time to be visited and this fact may lead Repsol to have more difficulties to break the barrier of 10 euros per share, at least with regard to the shortest term.
Endesa with benefits
Endesa has closed the first quarter of 2020 with good results thanks to the management of the liberalized market, to which the stability of the regulated market has been added. These good results reflect the impact of the entry into force of the new Collective Agreement and the recording of certain provisions for workforce restructuring, which have generated a positive impact of 267 million euros on the net result. The increase in net profit, excluding these extraordinary effects, has been 59%.
The peninsular accumulated demand for electricity has decreased by 3,2% compared to the same period in 2019 (-2,8% after correcting the effects of labor and temperature). In the Non-Peninsular Territories (TNP), the decrease has been 5% in the Balearic Islands and 1,4% in the Canary Islands (-3,2% and -1%, respectively, after correcting the effects of labor and temperature ).
Of course esThe situation has been aggravated by the declaration of a state of alarm, which has reduced demand significantly during the second half of March. In any case, the effect caused by the pandemic has not had a significant impact on the results of the first quarter. The first quarter of 2020 has been characterized by lower prices in the wholesale electricity market (~ 35 euros per MWh, -37%) as a consequence, mainly, of the decrease in demand, the greater participation of renewable energies, the reduction in the price of carbon dioxide (CO2) emission rights and the evolution of raw material prices.
In this regard, Endesa's CEO, José Bogas, highlighted that “Endesa's good results in the first quarter will help us to confront the impact of COVID-19 during the second quarter with guarantees. The company has already started up all the construction work for renewable parks, and we are fully committed to the investments foreseen in our strategic plan. We are even studying the possibility of accelerating this plan, especially in wind and solar plants, in order to help revive the economy by creating jobs and generating wealth ”.
How to invest in Spain
Spain is the 13th economy in the world for its nominal gross domestic product (GDP) and the 15th for its purchasing power parity (PPP). Although the economy suffered a deep contraction during the 2008 financial crisis, it has since become one of the fastest growing economies in Europe. International investors have renewed their interest in the country's as its economic recovery continues to gain momentum over time.
Competitive economy. The Spanish economy is mainly focused on services (71%), industry (14%) and construction (10%), with the rest of the economic growth coming from agriculture and energy. Within these sectors, the country is home to many large multinational companies, including the renewable energy operator Iberdrola and telecommunications companies such as Telefónica and Movistar.
The 2018 Global Competitiveness Report listed Spain's economy as the 26th most developed in infrastructure in the world. These rankings place it ahead of developed economies such as China, Italy and Portugal, with their high-speed rail system and highly developed technological infrastructure.
Invest in Spain with ETFs
The easiest way to invest in Spain is by using international ETFs, which provide instant diversification into a single security traded in the United States. By having a diverse portfolio of companies spanning many sectors, investors don't have to worry as much about concentration risks or buying and selling a portfolio of individual stocks. The trade-off is that these funds charge a modest expense ratio, which can lower overall returns over time.
The four most popular Spanish ETFs include:
- iShares MSCI Spain Capped ETF (EWP)
- iShares Currency Hedged MSCI Spain ETF (HEWP)
- SPDR MSCI Spain Quality Mix ETF (QESP)
- Deutsche X-Trackers MSCI Spain Hedged Equity ETF (DBSP)
There are many factors that international investors should consider before investing in these ETFs. In general, investors should look for the ETFs with the lowest expense ratios assuming everything else is equal to maximize returns. It is also important for investors to consider portfolio concentration risks with ETFs focused on specific sectors of the economy and the liquidity risks associated with ETFs that are rarely traded.
Invest in Spain with ADRs
American Depository Receipts - or ADRs - are another easy way to invest in Spain without opening a brokerage account abroad. These securities are tied directly to a basket of foreign stocks and are traded on a US stock exchange, which means investors do not have to worry about the tax implications of foreign capital gains. Many of these funds are also traded on national exchanges such as the New York Stock Exchange which can be more liquid than OTC exchanges.
The most popular Spanish ADRs include:
- Santander Bank (SAN)
- Telephone (TEF)
- Abengoa (ABGB)
- Bilbao Vizcaya Argentaria Bank (BBVA)
- Grifols (GRFS)
Again, there are many factors that international investors should carefully consider before buying ADRs. The most important factor is usually liquidity, especially in the case of ADRs that are traded on the OTC markets. Since foreign stocks tend to have fewer domestic followers, many ADRs trade significantly fewer shares each day than domestic stocks, which can make it risky when an investor tries to buy or sell at fair prices.
The final result
Spain has become an increasingly popular investment destination as its economy continues to recover from the financial crisis of 2008. As one of the fastest growing European economies in 2015, international investors may want to take a closer look at the economy that was once affected. Spanish ETFs and ADRs are the two easiest ways to invest in the country without having to face the hassle of opening a brokerage account abroad and paying taxes. With these tips in mind, international investors can include exposure to this promising economy in their portfolios.
Investment in brick
The price of Spanish housing increased by 4,68% during the year until the third quarter of 2019 (4,36% adjusted for inflation), which represents a deceleration compared to the growth of 7,16% the previous year and the slowest pace since the fourth quarter of 2016, according to the National Institute of Statistics (INE). On a quarterly basis, house prices increased 1.58% in the third quarter of 2019 (2.26% adjusted for inflation).
By property type:
Existing Homes: Prices increased 4.41% during the year through the third quarter of 2019 (4.08% adjusted for inflation), the slowest growth in three years.
New homes: prices increased 6.64% year-on-year in the third quarter of 2019 (6.31% adjusted for inflation), after the annual increases of 7.17% in the second quarter of 2019, 10.35% in the first quarter of 2019, 8.03 % in the fourth quarter of 2018 and 6.13% in the third quarter of 2018.
The Bank of Spain reports lower increases in house prices. During the year to the third quarter of 2019, house prices nationwide increased a modest 3,07% (2,75% adjusted for inflation). On a quarterly basis, house prices rose a miniscule 0,05% in the third quarter of 2019 (0,73% adjusted for inflation).
After seven long years of falling house prices, the Spanish real estate market only grew again in 2015. Spanish house prices had fallen a total of 36,3% (-42,9% adjusted for inflation ) from the third quarter of 2007 to the first quarter of 2015, and existing home prices fell as much as 43,1% (-49% adjusted for inflation), according to INE figures. There were 24 consecutive quarters of year-on-year declines.
Demand is gradually slowing down. Home sales in Spain fell 3,1% in the first ten months of 2019 compared to the same period of the previous year, to 427.638 units, after increasing 10,8% in 2018, 15,4% in 2017 , 14% in 2016 and 11,5% in 2015, according to the National Institute of Statistics (INE). The number of transactions for second-hand houses decreased by 4% but increased slightly by 1,3% for newly built houses.
Finally, remember that Of course that esThe situation has been aggravated by the declaration of a state of alarm, which has reduced demand significantly during the second half of March. In any case, the effect caused by the pandemic has not had a significant impact on the results of the first quarter. Where it cannot be forgotten that there have been two companies that have exceeded expectations in their business results in the first quarter of the year at very complex times due to the effects of the expansion of the coronavirus.