Equity market: The German marathon stock corporations

As the Americans say, betting on a “disaster du jour” on the equity market is a popular pastime among investors. High returns beckon in case of success. Without having specific company and sector expertise, such investments (e.g. turnaround at GE) still constitute superficial bets that may or may not work out. It can also take more years than planned for the “investment case” to pay off – if at all. Examples of this in recent years are, for example, shopping mall and shopping centre shares (including Sears) in the US or turnaround speculation on German bank stocks in Germany. Investors that “fall for” such special topics and support their investments with the corresponding financial firepower, lose valuable time. During this time, the markets continue to rise (the historical base rate in the DAX is around eight percent) so that opportunity costs accrue quite happily in the form of foregone profits. Investors (e.g. pension funds, funds with benchmarks) that “have to make” a return are not the only ones that cannot afford this.

Long-term investors should instead focus in particular on companies that have already done many things right in the past and can also prove this by their current “training level”. Furthermore, if the price is right, they can be worth considering as a long-term investment.

For the first time since 2016, we have once again sought after endurance stocks on the German equity market. These are companies that have achieved sustainable growth thanks to an obviously proprietary business model – known as German “marathon stock corporations”. We once again used parameters such as company sales, profit (EBIT), enterprise and book value in order to measure the current “training level” using a simple points system.

The most successful German marathon stock corporations include stocks with considerable market capitalisation, such as Fresenius, Wirecard and Henkel. Cancom, Grenke and Fielmann are “winners” in the medium-sized segment. KPS, Helma Eigenbau and Nexus are ranked first among the smaller stocks.

92 companies received very good grades, i.e. ¾ of all achievable points. This high number comes as no surprise; after all, the current economic recovery has lasted nine years now. As in previous years, the top stocks are disproportionately populated by many companies from the mid and small-cap segment, which is the classic mainstay of the German economy. Many of these stocks are unknown even to experienced investors, as they are smaller than the multinationals in the DAX and seldom attract the attention of the major media. These companies’ success stories have been too smooth and unspectacular. Nevertheless, the marathon stock corporations also include a few large groups.

 

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