Asset manager sees limited upside for share price if Commerzbank takeover deal goes through
The situation on the stock markets remains favourable, according to renowned asset manager Georg von Wallwitz. But with regard to one stock currently making headlines, the experienced portfolio manager has a clear opinion on steering clear, since the Commerzbank share price is being driven largely by the takeover speculation.
"A purchase is currently out of the question for us, because the share has already risen significantly as a result of the takeover moves,“ von Wallwitz said in an interview with Börsen-Zeitung. „The upside if it goes through is relatively small, the downside if it doesn't work out is considerable.“ Though of course, he notes that it would have been nice to have had the share before the takeover moves.
Coba takeover makes sense
Personally, von Wallwitz is working on the assumption that the whole thing will go through. „A takeover would make sense. Unicredit has proven that it can also manage German institutions very well,“ he says. A takeover of Commerzbank would not make much difference to Germany as a financial centre. But the German government can, of course, move to ensure that German influence is present in Milan.
In any case, German managers will also be allowed to sit in Milan and have a say, if the business in Germany becomes even more important for Unicredit after a takeover. That would then also be in Unicredit's own interest.
Von Wallwitz previously worked at DWS and Hauck & Aufhäuser, and is the founder and partner of Eyb & Wallwitz Vermögensmanagement, based in Munich and Frankfurt. Eyb & Wallwitz is one of the largest independent asset managers in Germany, and is celebrating its 20th anniversary this year.
„The conditions for further price gains on the stock markets are favourable,“ says von Wallwitz, who as lead portfolio manager looks after several investment funds such as the successful 1.7 billion euro multi asset product Phaidros Funds Balanced. „We are in the interest rate reduction cycle and the US economy is in a soft landing", he says. "Added to this is the positive development of corporate profits, which supports the high valuation of US stocks.“
Setbacks always possible
The experienced asset manager has already been through a number of stock market cycles. „There can always be a setback on the stock markets of around 10%“, he notes. "I do not expect a major correction of 20% or more; after all, we are in an interest rate cut cycle, so major setbacks are unlikely.“ When it comes to American stocks, it is important to take the positive development of the American economy into account. „US stocks are relatively highly valued, but the US economy is doing sensationally well.“
Von Wallwitz relies on active asset management and taking a detailed look. „I would not be surprised if the prices of the Magnificent 7 took a break. After all, these companies spend enormous sums of money, and it is not yet clear whether the money invested in AI will return with good interest,“ he says. "We look at the Mag7 as a group in a differentiated way, i.e. we look closely at the individual stocks. Due to the inflows into ETFs, many large stocks are very expensive.”
Buying high is always problematic, since even if it rises the return on investment will be limited. In particular, it is now important to diversify, and in the USA he is invested in several small caps that the firm considers attractive.
„We avoid China“
The experienced professional has a warning about BRICS: „ETF investors like to jump on what is currently fashionable, but over a five to ten year period, it is usually a bad investment if too much money has been invested somewhere," he says. „An example of this was the BRICS twenty years ago, where – with the current exception of India – there was little left for investors.“ He remains skeptical about developments in China, saying “we avoid stock investments in China. We doubt whether a government-imposed stock market boom will work in the long term.“
When it comes to stocks, it is always important to look at the individual company. „We look at the individual stocks, and there are convincing stocks in the emerging markets too. For example, we have held the South American e-commerce pioneer and market leader Mercadolibre in our equity fund for several years,“ explains von Wallwitz.
„On the stock side, we invest in monopolists and challengers, in line with our Schumpeter approach. We are not invested in German auto stocks or steel stocks. These sectors are struggling with overcapacity and have no moat to protect them,“ he explains. „Tesla is also greatly overvalued if the Robotaxis are not successful.“
SAP, Siemens, MTU
On the German stock market, he likes companies like SAP and Siemens – Siemens since it is is benefiting greatly from the trend toward factory automation and is well positioned worldwide. MTU is also overweighted, because the company is benefiting from high demand in the aviation and defence industries.
On the fixed income side, von Wallwitz, who studied mathematics and philosophy and regularly publishes books on financial and economic topics, notes that you can now make good money again with bonds. „We use government bonds as a safety cushion in our mixed portfolios." he says.
Treasury yields adequate
US government bonds are attractive, although of course the currency risk must be taken into account. „With yields of over 4%, US Treasuries currently offer a sufficient return,“ von Wallwitz argues. „Bunds are not very attractive at yields of just over 2%. The yield on Bunds is likely to rise towards 2.5%, and then they will be interesting again.“
