Head of Equity Strategy
Summary: Today we are announcing that our theme basket universe is expanding with a new basket focusing on renewable energy. The basket is the third best performing basket year-to-date as investors are rotating into renewable energy stocks as the EU is accelerating its push to become energy independent from Russia which means massive investments into renewable energy in the coming years. We are highlighting two new changes to our defence and commodities baskets in our preparation for providing access to our theme baskets.
Renewable energy is set to get a boost from Ukraine war and energy crisis
The energy crisis was already under way before the war in Ukraine broke out due lack of investments in oil and gas, and a historically bad year for wind energy. Russia’s invasion of Ukraine has catapulted Europe into emergency mode on energy security with the EU pursuing a path towards energy independence from Russia as quickly as possible. Part of this move towards independence is based on accelerating renewable energy and using excess renewable energy production in Power-to-X (PtX) which is a conversion of excess energy into hydrogen for energy storage.
Previously we had asset owners in renewable energy and manufacturers of equipment for renewable energy in our green transformation basket, but we have decided to spin out renewable energy production (solar, wind, hydro, geothermal, and biomass) into its own separate theme basket. The constituents in the basket is in the table below. Our renewable energy basket is the third best performing basket year-to-date highlighting the investor flows seeking exposure to this theme. The key risks to this theme is accelerating commodity prices on raw materials used for renewable energy equipment (steel, silicon, copper, cement etc.).
| Name | Mkt Cap (USD mn.) | Sales growth (%) | EBIT margin (%) | Diff to PT (%) | 5yr return |
| China Yangtze Power Co Ltd | 79,417 | 1.3 | 55.2 | 14.8 | 103.3 |
| LONGi Green Energy Technology Co Ltd | 61,761 | 74.8 | 14.0 | 41.8 | 1,027.5 |
| Orsted AS | 50,949 | 54.9 | 20.9 | 8.2 | 223.9 |
| Verbund AG | 36,634 | 38.5 | 26.5 | -12.9 | 528.5 |
| Vestas Wind Systems A/S | 29,593 | 5.2 | 2.1 | -1.5 | 87.4 |
| Enphase Energy Inc | 27,576 | 78.5 | 15.6 | 7.0 | 15,860.5 |
| EDP Renovaveis SA | 24,666 | 1.6 | 63.8 | -3.6 | 245.6 |
| Brookfield Renewable Partners LP | 19,278 | 7.5 | 30.0 | -3.2 | 229.3 |
| Constellation Energy Corp | 18,953 | NA | NA | -0.4 | NA |
| SolarEdge Technologies Inc | 17,793 | 34.6 | 10.5 | 5.6 | 2,037.9 |
| Corp ACCIONA Energias Renovables SA | 12,257 | NA | NA | 10.0 | NA |
| Siemens Gamesa Renewable Energy SA | 11,715 | -0.5 | -9.4 | 26.1 | -12.6 |
| First Solar Inc | 8,933 | 7.8 | 20.1 | -4.4 | 216.1 |
| Xinjiang Goldwind Science & Technology Co Ltd | 8,310 | -10.1 | 6.8 | 24.4 | 26.0 |
| Northland Power Inc | 7,567 | 1.6 | 38.6 | 8.4 | 108.5 |
| Sunrun Inc | 6,326 | 74.6 | -41.4 | 60.2 | 503.4 |
| ERG SpA | 5,086 | 27.0 | 22.8 | 12.1 | 221.9 |
| Ormat Technologies Inc | 4,627 | -6.0 | 25.5 | -6.7 | 48.1 |
| Drax Group PLC | 4,169 | 22.8 | 3.9 | 2.5 | 211.8 |
| Solaria Energia y Medio Ambiente SA | 2,822 | 78.5 | 76.8 | -2.0 | 1,902.0 |
| Aggregate / median | 438,432 | 15.3 | 20.5 | 8.2 | 223.9 |
Defence and commodities baskets are updated
Due to many client request about access to our theme baskets we have decided to pursue the availability of these baskets for our clients. Part of this process is streamlining the theme baskets which means that we have decided to reduce theme baskets to 20 stocks. The two first baskets that have been reduced to 20 stocks are the defence and commodities baskets.
In the defence basket we removed the five smallest companies on market value which were Babcock International, Chemring, Invisio, Avon Protection, and Avio. See the updated defence basket below.
| Name | Mkt Cap (USD mn.) | Sales growth (%) | EBIT margin (%) | Diff to PT (%) | 5yr return |
| Raytheon Technologies Corp | 149,280 | 13.8 | 7.7 | 8.5 | 70.1 |
| Lockheed Martin Corp | 118,869 | 2.5 | 13.6 | 1.8 | 90.6 |
| Boeing Co/The | 112,622 | 7.1 | -4.7 | 36.1 | 15.2 |
| Airbus SE | 96,443 | 4.5 | 10.2 | 34.0 | 63.0 |
| Northrop Grumman Corp | 70,813 | -3.1 | 15.8 | -2.5 | 108.8 |
| General Dynamics Corp | 67,451 | 1.4 | 10.8 | 6.6 | 45.5 |
| L3Harris Technologies Inc | 48,877 | -2.1 | 11.8 | 5.4 | 153.3 |
| TransDigm Group Inc | 36,995 | 2.9 | 37.5 | 11.1 | 260.7 |
| BAE Systems PLC | 29,531 | 1.3 | 11.5 | 6.4 | 38.5 |
| Thales SA | 26,556 | -4.7 | 7.4 | 12.6 | 35.9 |
| Howmet Aerospace Inc | 15,215 | -5.5 | 15.0 | 11.1 | 72.7 |
| Dassault Aviation SA | 13,230 | 32.0 | 7.4 | 8.1 | 25.8 |
| Rolls-Royce Holdings PLC | 10,915 | -3.9 | 4.2 | 22.6 | -61.2 |
| Elbit Systems Ltd | 9,743 | 12.1 | 8.1 | 1.8 | 104.8 |
| Rheinmetall AG | 9,247 | 2.1 | 10.6 | 0.9 | 172.0 |
| Kongsberg Gruppen ASA | 7,206 | 7.2 | 10.4 | -6.9 | 269.4 |
| Leonardo SpA | 5,805 | 5.4 | 5.7 | 19.5 | -26.9 |
| Saab AB | 4,943 | 10.5 | 7.4 | -3.8 | 3.0 |
| Ultra Electronics Holdings PLC | 3,117 | -1.1 | 12.4 | 1.8 | 84.8 |
| QinetiQ Group PLC | 2,337 | 7.2 | 7.3 | 14.8 | 23.3 |
| Aggregate / median values | 839,194 | 2.7 | 10.3 | 7.4 | 66.6 |
The commodities basket has been changed in a more dramatic way. First of all, we have changed the name from commodity sector to commodities. Secondly, we have removed chemicals from the basket because it was too high up the value chain of commodities as chemicals are a value-added product and not a raw materials product such as coal, iron ore, or petroleum. By removing chemicals the commodities basket also gets a higher return correlation with the Bloomberg Commodity Total Return Index which is the leading benchmark index on commodities. The commodities basket has also been reduced to 20 stocks with a focus on agriculture, energy, mining, and forest products. The constituents in the commodities basket can be seen below and the basket is also the best performing basket year-to-date up 32.9% (see performance table above).
| Name | Mkt Cap (USD mn.) | Sales growth (%) | EBIT margin (%) | Diff to PT (%) | 5yr return |
| Exxon Mobil Corp | 351,896 | 54.9 | 8.4 | 6.2 | 31.1 |
| Shell PLC | 210,021 | 44.8 | 8.5 | 14.9 | 31.0 |
| BHP Group Ltd | 199,986 | 47.1 | 48.4 | -8.6 | 248.1 |
| PetroChina Co Ltd | 150,023 | 35.2 | 6.9 | 23.7 | -10.1 |
| Rio Tinto Ltd | 135,756 | 42.3 | 47.0 | -1.6 | 238.9 |
| ConocoPhillips | 130,357 | 144.0 | 25.9 | 13.1 | 135.2 |
| Equinor ASA | 123,031 | 94.0 | 37.8 | -10.0 | 167.7 |
| Petroleo Brasileiro SA | 95,797 | 66.4 | 44.7 | -3.3 | 94.4 |
| Glencore PLC | 87,756 | 43.1 | 5.0 | 8.1 | 84.0 |
| China Shenhua Energy Co Ltd | 87,525 | 43.7 | 23.9 | 1.3 | 135.0 |
| Canadian Natural Resources Ltd | 73,438 | 77.9 | 34.5 | 8.7 | 124.4 |
| Newmont Corp | 65,607 | 6.3 | 10.6 | -14.3 | 173.0 |
| Southern Copper Corp | 60,432 | 36.9 | 55.5 | -20.7 | 164.8 |
| Archer-Daniels-Midland Co | 51,281 | 32.5 | 3.3 | -16.9 | 134.0 |
| Mosaic Co/The | 24,264 | 42.3 | 20.0 | -1.8 | 138.6 |
| Wilmar International Ltd | 21,872 | 30.2 | 4.1 | 25.5 | 54.5 |
| Norsk Hydro ASA | 21,066 | 30.9 | 11.1 | 4.9 | 100.4 |
| Bunge Ltd | 16,097 | 42.9 | 3.6 | 0.4 | 70.7 |
| Mowi ASA | 14,463 | 11.8 | 13.1 | 3.0 | 131.4 |
| Svenska Cellulosa AB SCA | 13,745 | 2.2 | 40.2 | -7.2 | 247.9 |
| Aggregate / median | 1,934,415 | 42.6 | 16.5 | 1.3 | 134.0 |
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Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
As US economic slowdown hints at a shift away from exceptionalism, USD faces downside with looming Fed cuts. AUD and NZD set to outperform as their rate cuts lag. JPY gains on carry unwind bets and BOJ pivot.
Uncover the shifting focus in 2024's FX markets towards growth resilience and relativity, away from bond yields and inflation stories.
Embrace the metal revolution on the commodity market in the coming year, with a focus on gold, silver, platinum, copper, and aluminum.
The gloominess of geopolitical conflicts and the repetitive nature of political agendas. What else does 2024 hold in store for us?
The disheartening cycle of unresolved geopolitical conflicts, the rise of polarizing political parties, and the stagnation of productivity.
Understand China's political landscape in Q4 2023 and the impact on counter-cyclical initiatives, with a focus on the pivotal Q1 2024.