May 22, 2020

Corona crisis stock pick chat: BASF

While exchanging COVID-19 related experiences, Dr. Hermann Stern of Obermatt and Douglas Günthardt of Ricola decided upon Hermann’s another stock purchase after the pandemic-related stock market crash.

You may agree that Europe will have to produce more medical equipment and supplies in the future, which may make chemical and pharma companies a good pick. This is exactly why Hermann and Douglas discuss a custom-made list of big European chemical companies, some of them being: Novartis, Lonza, Clariant, BASF, Bayer... The real question is: Which of these companies have a good future? In order to assess this question, one must, in actuality, look into the future, or, better, analyze the currently available data and try to figure out how the companies will cope with the change of the environment.

Are the more expensive stocks future-proof? Is the price justified? Let’s take Lonza as an example: The company is very well positioned on the market and people are ready to pay a higher price for their stocks, but let’s analyze it more thoroughly. Even though Lonza’s shares were stable throughout the stock market crash, Hermann and Douglas agree that the company relies on their customers and the contract-based manufacturing they do, so they might not be a great pick for the long run after all.

On the other hand - Bayer isn't that "popular" currently, due to their advertising lawsuits and the Monsanto acquisition liabilities. So their stock price is low. This doesn’t apply to other all cheap stocks which may or may not be good buying opportunities as most of them went through a huge price drop due to the stock market crisis and will return.

Hermann sets his eye on BASF: Why are their stocks priced so low? They have had slow growth recently, but overall, all of the parameters are good, according to the Obermatt method, especially for such a large company. When analyzing returns throughout the last couple of months, it seems that BASF lost a fourth of its value during the crisis, but when looking at a 5-year scale, it is currently at around half of its maximum value - which makes it a reasonably good priced stock. The stock may do well in the long run and that convinces Hermann to invest in BASF.

Has someone managed to achieve the single best trade of all time despite the stock market crisis? Are our investors worried for the future? Find out by listening to this friendly discussion.

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