The Italian stock market (prices as of July 12, 2024) has recorded a positive performance of 0.7% in the last month and is up by 13.5% on an annual basis. The FTSE Italy Mid-Cap index (+2.0%) explains Andrea Randone, Head of Mid Small Cap Research at Intermonte – ha outperformed the main index of 1.2% in the last month (-3.6% on a relative annual basis), while the FTSE Italy Small Caps index (+0.4%) recorded a performance of 0.3% below the market and still a -10.3% on a relative basis since the beginning of 2024. Looking at the performance of mid/small caps in Europe, the MSCI index Europe Small Caps has grown by 5.5% in the last month, outperforming Italian mid small caps.
Mid and Small Cap Positive Performance and Growing Liquidity
Since the beginning of 2024, we have implemented a review of the -3.1%/-2.5% of our EPS estimates for 2024/2025; focusing on our mid/small cap coverage, instead, we reduced 2024/2025 EPS by -1.3%/-2.1%. In particular, in the last month the revision of estimates on large caps has been slightly negative, while it has been negligible for mid caps due to the lack of a relevant news flow. In this sense, the next few weeks will be significant as we enter the heart of the first half reporting season.
If we compare the YtD performance with the change in estimates for the 24 financial year in the same period, we see that FTSE MIB stocks have recorded a YtD re-rating of 17.2% (the same parameter was +9.9% a month ago); mid-caps have appreciated by 9.3%, while small caps by 22.9%. On a P/E basis, our panel is trading at a premium of 27% compared to large caps, well above the historical average premium (17%), but slightly below the level of a month ago (29%).
The Intermonte analysis
Looking at the trend of the official indexes italiani, we note that large-cap liquidity over the past month (measured by average volumes multiplied by average prices over a given period) is 13.3% higher than the same period a year ago and up 19.1% year-over-year. The picture is similar for mid/small caps: specifically, liquidity for mid-caps is up 19.3% year-over-year, while for small caps it is up 16.8% year-over-year. In particular, lliquidity remained quite positive in the last month, thanks also to an easy comparison.
Investment Strategy
The season of the rQuarterly results is about to begin and the macro signals, such as those on the industrial productionsuggest – concludes Randone – “that a slight slowdown is underway both in the US and in Europe. Therefore, the direction of the estimates should remain slightly negative also in the coming weeks. In this context, we confirm our preference for stocks with good cash generation and exposure to solid international trends. Once again, we believe that the subgroup of “digital enablers” could benefit from a rather resilient outlook. The liquidity framework remains difficult for small and mid-cap companies, but with some progressive signs of improvement compared to the recent past. The launch, expected by the end of the year, of a fund sponsored by Cassa Depositi e Prestiti, could represent a significant catalyst for Italian mid/small caps. The fund would have approximately 1 billion euros of initial endowment, 49% financed by CDP and 51% by private investors, including pension funds, insurers and asset management companies. The investment parameters of the fund would be similar to those of PIR funds, with a focus on mid/small cap issuers”.
