Spotify (NYSE: SPOT)
This year, the streaming audio stock has underperformed by 29 percent. Spotify shares have fallen for five straight sessions, including a 5.7 percent drop on Wednesday, following the company’s latest earnings report, which showed slowing growth.
“Concerns that slower-than-expected growth is indicative of tougher-than-anticipated competition in newly launched markets will likely persist unless growth accelerates. However, we see the ultimate economic impact of this dynamic reflected in shares,” according to the note.
Even with disappointing short-term results, Guggenheim believes Spotify’s long-term trajectory is positive.
“Our previous concern was that investor expectations left only a small margin of safety for share performance. We now see shares as more attractively priced for their long-term growth potential, which we anticipate will be driven by a best-in-class user experience, industry-leading product innovation, and growing content differentiation via podcasting and voice chat,” according to the note.
11 stocks to buy 11 best stocks from Southeast Asia
“We believe this interest is justified — these markets offer value, and most funds underweight the region,”
HSBC advised using a “bottom-up” approach when selecting stocks to buy, citing the pandemic as a risk to Southeast Asia’s economic growth and listed companies’ earnings. Bottoms-up investing means concentrating research and analysis on individual stocks rather than the macroeconomic environment.
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The bank chose companies in Indonesia, Singapore, and other Southeast Asian countries that are gaining market share in their respective industries and offer the potential for higher returns despite higher investment risks.
According to HSBC, the following are the 11 stocks to buy.
HSBC said it likes Indonesia for a variety of reasons, including low valuations and the light positioning of mutual funds, implying that more money could flow into the market.
Four of the bank’s 11 stock picks in Southeast Asia are from Indonesia. The stocks are as follows:
Astra International is a conglomerate with a strong presence in the Indonesian automotive market. According to HSBC, an increase in car demand and government auto-tax exemptions would help allay investor concerns about Covid’s impact on sales.
PT Telkom is a company that provides telecommunications services. According to HSBC, the company’s net profit is expected to grow by an average of 9% per year from the fiscal year beginning in 2020 to the fiscal year ending in 2023.
Elang Mahkota Teknologi is a holding company for a number of local technology companies. Bukalapak, its e-commerce division, is set to become one of the first Indonesian internet companies to list on the local exchange next month.
Bank Rakyat Indonesia is an Indonesian bank. According to HSBC, the Indonesian lender plans to expand its dominance in the country’s microfinance sector, where it currently has a market share of around 65 percent.
According to HSBC, the Philippines has done a better job of containing the Covid delta variant than other markets in the region, and reopening the economy could boost stocks.
The bank is fond of two Philippine stocks:
HSBC describes Ayala Land, a major property developer in the Philippines, as a bellwether stock. The bank stated that it is optimistic about the real estate market.
Monde Nissin is a food and beverage corporation. HSBC claims that its ownership of Quorn, one of the world’s largest players in the alternative meat market, provides it with “unique exposure” to the trend.
Foreign funds, however, remain “underweight” on Singapore, which could support stocks, according to the bank. It favors three city-state stocks:
Sea Ltd is a publicly traded internet company in the United States with operations in gaming, e-commerce, and payments. According to HSBC, the company’s e-commerce unit, Shopee, is well-positioned to strengthen its market leadership in Southeast Asia.
Capitaland, a large real estate firm that is reorganizing to separate its development and investment businesses. The eventual listed entity will be a global real estate investment manager, which HSBC expects to perform well.
Sembcorp Industries is a company that specializes in energy and urban development. According to HSBC, the company is a major beneficiary of Southeast Asia’s transition to renewable energy.
Thailand and Vietnam are two countries
HSBC chose one stock from Thailand and one from Vietnam to round out its top picks for Southeast Asia:
Thai Beverage, a Bangkok-based beverage manufacturer, is listed in Singapore. The bank praised the company’s dominance in Thailand’s alcohol market.
Vietnam Dairy, also known as Vinamilk, has a market share of more than 50% in dairy milk in Vietnam. According to HSBC, the Vietnam-listed stock is one of the best proxies for the country’s consumer sector.