The Italian stock marketuntil August 23, 2024, recorded a negative performance of 2.8% in the last month and was up 10.9% on an annual basis. The index FTSE Italy Mid-Cap (-2.9%) has performed almost in line with the main index over the past month (-4.8% on a relative annual basis), while the index FTSE Italy Small Caps (-1.0%) outperformed the market by 1.8%, but still down -8.3% on a relative basis since the beginning of 2024. Looking at the performance of mid/small caps in Europe, the MSCI Europe Small Caps index fell by 0.4% in the last month, outperforming Italian mid/small caps. These are some of the data that emerged from the analysis conducted by Andrea RandoneHead of Mid Small Cap Research at Intermonte (here is the analysis conducted last autumn).
Estimates and ratings
“Since the beginning of 2024, we have implemented a revision of -3.5%/-3.5% of our estimates on the EPS for 2024/2025; focusing on our coverage of the mid/small capinstead, we have modified the EPS for 2024/2025 of the +2.2%/-0.9% – Randone explained –. In particular, in the last month the revision of the estimates has been negative for large caps (-1.8%/-2.0% on 2024/2025 EPS), while it was slightly positive for mid caps (+1.2%/+0.5%), mainly thanks to the collection through the networks of financial promoters; some small caps have yet to communicate the results of the first half of ’24, expected in the next few weeks”. ”
If we compare YtD performance with the change in estimates for the ’24 financial year in the same period, we see that the stocks of FTSE MIB they recorded a YtD re-rating of 14.9% (the same parameter was +17.2% a month ago); the mid cap yes they are revalued by 1.6%, while the small cap of 20.5%. On a P/E basis, our panel is trading at a 26% premium to large caps, well above the historical average premium (17%), but slightly below where it was a month ago (27%),” the analyst added.
Liquidity Chapter
“Looking at the trend of the official Italian indices, we note that the Large Cap Liquidity in the last month (measured by multiplying average volumes by average prices over a given period) is higher than 9.1% compared to the same period a year ago and is up 18.4% on an annual basis – Randone underlined –. The the picture is similar for mid/small caps: specifically, liquidity for mid-caps is up 19.6% year-over-year, while for small-caps it is up 18.3% year-over-year. In particular, liquidity has remained quite positive over the past month, especially for mid-caps.”
Investment Strategies
“After a series of contrasting macroeconomic data, the Fed Looks Ready to Change Monetary Policy as inflation risks have cooled while there are signs of a worsening of the labor market – the Intermonte analyst finally observed.
Although the ECB you look like thencline to confirm a cutting strategy of the most gradual rates, the perspectives for the second half of 2024 they should be favorable for mid-small caps. In this context, we confirm our preference for stocks with good cash generation and exposure to solid international trends. Once again, we think that the subgroup of “digital enablers” could benefit from prospects rather resilientas well as others “quality” names.
The framework of the liquidity is showing some progressive signs of improvement compared to recent trends and could improve further if growth stocks benefited from a gradual portfolio reallocation strategy. As we have already commented, the launch (expected by the end of the year) of a fund sponsored by the Italian development bank CDP It could be a catalyst significant for Italian mid/small caps. The fund would have approximately €1 billion in initial funding, 49% from CDP and 51% from private investors, including pension funds, insurers and asset management companies. The fund’s investment criteria would be similar to PIR funds, with a focus on mid/small cap issuers.”
