Germany is one of the hardest-hit economies by the ongoing global economic uncertainty. Economists at Credit Suisse Bank predict that Germany is headed for a deep recession catalysed by its growing trade imbalances.
The U.S. continues to wage tariff wars on the E.U., and Germany being its economic powerhouse is taking all the heat. Just a week ago, the U.S. announced 10% tariffs on European-made Airbus planes and 25% duties on Scotch and Irish Whiskies, French wine, and cheese from the region.
The uncertainty resulting from the tariff wars is causing global economic jitters, slowing down the demand for goods and services worldwide. Germany as a net exporter is experiencing a drastic slowdown in manufacturing further stressing the economy.
But what does the economic slowdown mean for investors? A recession provides an excellent opportunity for value investors to make adjustments in their portfolios and position themselves for long term growth. This is, therefore, the best time to shop for undervalued growth stocks.
German DAX 30 analysis
The DAX 30, which is the benchmark index for the German equity market, is still showing stability, but analysts predict that it will soon give in to the rising uncertainty. Consequently, stock prices may dip significantly in the coming weeks, thus creating an opportunity to buy.
Since the beginning of 2019, the DAX 30 index has increased by 17.58%. At the moment of writing it is traded at 12,432. The German benchmark index had a historical record high of 13,596 in January 2018 and reached its all-time low of 936 in January 1988.
Trade Germany 30 - DE30 CFD
Despite a steep plunge since the beginning of this month, the DAX 30 is showing some level of resilience and is expected to maintain overall growth in the long term.
The majority of DAX movers may therefore not shed any value and therefore do not make a good case for buy. Instead, investors can focus on stocks showing weak growth and also with a direct relationship with the sectors affected by the tariff wars. These are the most likely to lose significant value momentarily hence creating an opportunity to buy. Therefore, the Germany 30 analysis presents the following stocks as the best DAX movers, which can attract investors attention.
Volkswagen tops the list of the DAX 30 stocks we believe are a good buy for growth investors. The car manufacturer's main markets include Europe, Asia Pacific, and North and South America. This company is therefore directly affected by the tariff wars and is headed for a slowdown.
However, analysts forecast that the slowdown will not last for long. Analysts predict that the price will hit €239 ($263, £210) in the 12 months. The stock is currently trading at €161 ($177, £141) and is expected to go down further in the coming weeks.
BASF AG is a leading global manufacturer of chemicals. The stock is among today DAX movers and a great buy according to analysts. Like other stocks in the manufacturing sector, BASF AG is likely to slow down in the short run but maintain steady growth in the long term.
According to the live price chart, the stock is currently trading at its lowest and is, therefore, a good buy. The stock is expected to hit €65.12 ($71.7, £57) by the end of the year.
Continental AG is another DAX 30 gainer worth buying. This automotive spare parts manufacturer is also expected to decline in the short term due to global uncertainty. However, the long term outlook is positive, with analysts predicting that the stock will nearly double in value in the next 12 months.
A poll by CNN Business shows that most analysts recommend that investors buy and hold this stock. The stock is currently at the bottom of its 52 weeks range, meaning that this may be the best time to buy.
Bayerische Motoren Werke AG
BMW is another car manufacturer that is expected to feel the pinch of the slowing down sector. The stock is likely to plummet momentarily but will regain quickly and probably hit an all-time high in the next two years. This stock is, therefore, a good buy for growth investors.
Data from Simply Wall S.T. shows that BMW is significantly undervalued in terms of fair value and is a good value based on its P.E. ratio of 8.5X. The stock has a forecasted annual growth of 7.1%, which is below the market rate of 12.7%. Even so, it is a steady dividend payer when compared to companies in the same category.
The bottom line
Despite the global economic uncertainties and the stressed economy, German stock market is always full of investment opportunities. With contracts for difference, it does not matter whether your view of the DAX 30 and its constituents is positive or negative. You can always try to profit from the future price fluctuations, regardless of their direction. Follow the latest news and track the DAX 30 live rate with Capital.com.
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