There has never been a better time to ignore what analysts and other experts are saying about the market, the head of equities at ING Investment Management Middle East has said.
The market is now so firmly convinced that 2009 will be a year of doom and gloom that anyone willing to make a punt on a slightly rosier outlook could stand to make a lot of money.
“Whenever we reach this stage of consensus, it’s actually a good time to be a contrarian and say the opposite,” Fadi al-Said told Arabian Business.
“Yes, the prospects have changed a lot, but you have to look at to what extent these variables have been priced into the stock market.”
Unless there is a bankruptcy in one of the major, listed company - and the odds of that happening are low - many stocks could do better than expected, he said.
The market is currently not pricing in any upside risk, such as oil rebounding or the credit markets being restored following government intervention.
But real estate may not be the right sector to be a contrarian in, Said cautioned.
“I think investors should focus on companies that will continue to do business and who don’t depend on yes and no decisions,” he said.
“For instance, when things are fine, real estate companies sell a lot, and they sell at increasing prices. When things are bad people stop buying, so they will have a lot of projects not selling.”
Companies with little or no debt and that aren’t dependent on capital intensive projects are among Al-Said’s top picks. These include budget carrier Air Arabia and logistics group Aramex.
Retailers of essential, non-cyclical goods such as dairy company Almarai are also high on his
“The market is treating all stocks the same, without differentiatin,” he said.