I'm new to investing, what should I do? Which assets or securities should I invest into? How do I maintain the risk and reward balance? How can I earn in the long term?
In response to these beginner investors' questions, we already published Freedom Finance analysts' tips on building a starting portfolio with US stocks. Once it was published, we received many questions from the clients who prefer to invest in EUR and trade EU companies' stocks.
So, here it is, a portfolio of 10 European stocks with a projected yield of 12.60% in EUR. This portfolio is ideal for beginners, but is also relevant for experienced investors who are actively trading IPO's and investment ideas.
Please note that this portfolio assumes 83% of free margin to be invested into stocks. We recommend keeping the remaining 17% of your funds to buy stocks with investment ideas and trade IPO's.
Invest and get profit with our recommendations!
Current Price: €137
Target Price: €177
Projected Yield: 29.20%
Portfolio Share: 10%
SAP (XETR:SAP.EU) is one of the largest German cloud based software vendors. SAP delivers products for managing companies and interacting with customers. The company has customers all over the world. In 2020, the number of enterprise customers amounts to 14,600, with 200M users. SAP is a market leader in enterprise software, databases, analytic tools, intellectual techs, and experience management. The company is quite sustainable financially, which allowed it to successfully overcome the COVID-19 crisis.
In the first six months of 2020, the company earnings went up by 4%, while the net profit margin increased from 3.70% to 12.80% compared to the same period last year. The main growth drivers are an increase in the number of enterprise clients and the developments in the popular cloud solution sector. The company expects its cloud and software businesses to reach 80% of total earnings by 2023. In addition, SAP regularly pays dividends, the amount of which is 40% of the net profit.
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Current Price: €315
Target Price: €360
Projected Yield: 14.30%
Portfolio Share: 8%
ASML Holding NV(Euronext:ASML.EU), a holding based in the Netherlands, is the largest microcircuit equipment production manufacturer. In particular, the company manufactures and maintains semiconductor lithography equipment systems. ASML Holding primarily targets APAC and Americas.
The semiconductor market is a promising sector, which shows significant growth rates and substantial expansion of production capacity in the industry. This trend could help ASML Holding maintain its long term earnings growth. ASML Holding is a financially stable company with a low debt burden. According to the company officials, the earnings may grow from the current €11.80B to €15B or €24B by 2025, depending on various market scenarios.
Despite the current crisis in the first six months of the year, the company was able to post higher earning (+20%), while the net profit margin was 19.80%. ASML Holding regularly pays dividends, which amounted to €2.40 per share in 2019. The company also announced it would buy out shares worth €6B during 2020-2022, which will also contribute to further stock price rise.
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Current Price: €118
Target Price: €130
Projected Yield: 10.10%
Portfolio Share: 8%
Siemens AG (XETR: SIE.EU) is one of the largest German corporations operating in many directions. In particular, the company focuses on power equipment production, electronics, transport, medical equipment, and providing specialized services in manufacturing production and communications.
Due to the diversification of business areas, the current crisis did not have a significant impact on the company's activities. The decline in earnings in some areas was partially offset by the rising earnings in others. The company's management performed cost optimization and was able to keep the free cash flow at a stable level. Future start-ups and share buybacks may contribute to the further rise in value. In late September 2020, the company will create a renewed Siemens Energy division through a public listing, thanks to which the corporation will receive additional revenue. In addition, Siemens will continue to buy out shares worth €500M until mid-2021.
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Current Price: €95
Target Price: €113
Projected Yield: 19%
Portfolio Share: 7%
AstraZeneca (CBOE BZX: ZEG.EU) is a pharmaceutical holding based in the UK and Sweden, which focuses on researching and producing medical drugs. AstraZeneca's core business are drugs against oncology and internal diseases. The company is also developing a vaccine against COVID-19, working in collaboration with the University of Oxford. This vaccine is considered one of the most promising, with AstraZeneca already having signed a number of contracts for its delivery. The total size is over 1.10B doses, with an average price of $4 per dose. The implementation of the signed contracts may increase the company's annual revenue by over 18%. The company posted positive financial results in the first six months of 2020, with the earnings having increased by 14%, mainly due to an increase in sales of cancer drugs. The company's strategy to increase sales of new drugs is also working successfully: in the first six months of 2020, new drug sales accounted for 50% of the total earnings, compared to 40% the previous year.
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Current Price: €183
Target Price: €200
Projected Yield: 9.20%
Portfolio Share: 8%
Allianz SE (XETR: ALV.EU) is an international financial company based in Germany, one of the largest corporations in the insurance and asset management market. The core business directions of the company include property insurance, life insurance, and asset management. The company has been quite strong financially during the pandemic, with the revenue in the first six months of 2020 having declined by only 1.50%, mainly due to a decrease in life insurance earnings (-3.40%). At the same time, the revenue in property insurance and asset management increased by 0.30% and 3%, respectively. In June 2020, the life insurance market started gradually recovering, with which the company is expected to post good financial results in the second six months of 2020. Besides, Allianz SE is expecting to sell life insurance asset portfolio worth €9B. The preliminary price is estimated at €500M, which might also strengthen the company's financial condition.
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Current Price: €90
Target Price: €105
Projected Yield: 16.60%
Portfolio Share: 10%
Nestle (XETR:NESR.EU) is a multinational corporation based in Switzerland, which is known as the world's largest food manufacturer. The company has a strong business model based on a diversified portfolio across various product categories, locations, and distribution channels. In the first six months of 2020, the company's earnings decreased by 9.50% due to the sale of multiple subsidiaries and foreign exchange revaluation. However, organic earnings grew by 2.80% over the same period. Despite the COVID-19 crisis, Nestle shows strong financial performance, with the operating and net profit margins being at 16.90% and 14.30%, respectively.
By 2025, the company is expected to reorganize its Waters business, focus on expanding its premium mineral water brands, and sell most of Nestlé Waters business in North America. This may have a positive impact on the corporate earnings. An additional factor in the company's favor is that Nestlé will buy out its shares over the next three years. In the first six months of 2020, the company managed to spend CHF 4.20B out of the CHF 20B announced.
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Current Price: €52
Target Price: €60
Projected Yield: 15.30%
Portfolio Share: 10%
Unilever (Euronext:UNA.EU) is one of the global leaders in food and household chemicals markets. The company's stock is a traditional safe haven for investors. Unilever markets its products in 190 countries, the core segments being personal care, food, home care, and refreshment. The company is confidently coping with the 2020 crisis: in the first six months of 2020, its earnings declined by only 1.60% compared to the same period in 2019. However, must of the negative impact was accounted for by the currency revaluation (-2.50%), while the real sales decreased by only 0.10%. The economic recovery will help restore the company's earnings growth. Operating profit margin already reached 19.80%, while the earnings per share rose from €1.27 to €1.35. The company has a stable free cash flow of €2.85B in the first six months of 2020. Unilever stock is also attractive thanks to dividend payments, which are €1.64 per share, or 3% per annum.
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Current Price: €282
Target Price: €315
Projected Yield: 11.70%
Portfolio Share: 8%
Adidas (XETR: ADS.EU) is one of the largest international manufacturers of sportswear, footwear, and accessories. This company is a major player in the European market, and is second only to Nike across the globe. The Adidas Group includes not only the Adidas brand, but also Reebok. During the global lockdown, the company had to close almost all stores in APAC, which accounts for 70% of all Adidas' stores worldwide. As a result, the earnings dropped significantly: in the first six months of 2020, the revenue declined by 26.90%, while the operating loss was at €286M, and the earnings per share amounted to €1.35. Despite financial issues, however, the company has some positive news to deliver. For instance, the sales through the proprietary e-commerce platform increased by 93% and reached one-third of total sales. Since May, Adidas started opening its stores, and by late June 83% of them were open, with the company posting an increase in customer conversion. Starting from the second six months of 2020, the holding's management expects a recovery in sales, and sees the operating profit at €600M to €700M in Q3 2020. These factors will contribute to further financial growth of the company and to the stock price recovery.
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Deutsche Börse AG
Current Price: €151
Target Price: €175
Projected Yield: 15.90%
Portfolio Share: 7%
Deutsche Börse AG (XETR:DB1.EU) is a stock exchange that provides investors, financial institutions, and companies with an access to capital markets in Europe, Americas and APAC. The company's operations cover security and derivative trading, clearing and custody services, etc. Over the last few years, the company's earnings grew substantially, driven by both organic growth and merger and acquisition deals. The COVID-19 panic in the financial markets worked well for the company, as the volatility and the number of transaction temporarily increased. The market collapse led to many new investors coming, thanks to which the total trading volume increased by 25% on average and reached €150B per month. In the first six months of 2020, Deutsche Börse posted excellent results, with both the earnings and the EBITDA increasing by 17%. Meanwhile, the adjusted earnings per share were at €3.68, or up 16% YoY. The company is planning to further maintain its current organic growth and invest into new technologies. The Deutsche Börse AG management expects positive financial results in 2020; the rising interest in financial markets amidst the pandemic leads to an optimistic outlook regarding the company's stock price.
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Current Price: €202
Target Price: €270
Projected Yield: 33.60%
Portfolio Share: 14.5%
Spotify (XETR: SPOT.EU) is one of the largest web streaming services that supplies legal access to music, audio books, and podcasts. The company has been actively expanding its audience over the past few years: as of late June 2020, the number of active users per month was at 299M, including 130M with a paid Premium subscription. In Q2 2020, these numbers increased by 29% and 27%, respectively, compared to the same period last year. The company has tremendous opportunities to expand its audience, as the potential market is estimated at 3B of solvent users. So far, the company has shown low ROI due to the large size of royalties to music copyright holders. With the growing number of users, the company may have more leverage in negotiations with copyright holders and increase the margin of its business. Recently, Spotify has started expanding its podcast library by acquiring media companies that work in this segment. The expansion will enable Spotify to significantly increase its revenue by selling high margin ads with podcasts. As such, Spotify is an attractive asset with high growth potential, which is worth including into your portfolio.
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How to Buy Shares
If you don't have an investment account yet, open it now: this can be done online, in just 10 minutes. All you need to do is fill out a short form and verify your account.
Once your account has been opened, you can buy shares in any of the following ways, whichever is more convenient to you:
1. Freedom24 Web Platform: In the Web Terminal section, type the company ticker in the search box and select the company in question from the results. Open a secure session in the trading window on the right, select the number of shares you want to buy, and click Buy.
2. Freedom24 iPhone App and Android: Go to the Price screen and tab the search icon in the top right corner. In the search dialog that shows up, type the company ticker and select the company in question in the search results. You will then see the stock in the market watch; tap it and go to the Order tab in the dialog that shows up. Specify the number of shares you want to buy and click Buy.
The stocks listed above are trading on European exchanges, and their price is in EUR. If your account currency is different, you need to convert your funds to EUR. To do so, go to Web Platform > Account Balance in the trading platform, or select My Portfolio > Free Margin in your Member Area.
Then, click the Convert green button near the EUR box, specify the amount, and confirm your transaction.
You can also convert US dollars to euros via the Freedom24 app: go to Portfolio, select Currency Exchange, specify the amount, and confirm your transaction.
*Additional information is available upon request. Investment in securities and other financial instruments always involves risks of capital loss. The Client should make himself aware at his own accord, including to familiarize himself with Risk Disclosure Notice. Opinions and estimates constitute our judgment as of the date of this material and are subject to change without notice. Commissions, fees or other charges can diminish financial returns. Past performance is not indicative of future results. This material is not intended as an offer or solicitation for the purchase or sale of any financial instrument. The opinions and recommendations herein do not take into account individual client circumstances, objectives, or needs and do not constitute an investment advice service. The recipient of this report must make their own independent decisions regarding any securities or financial instruments mentioned herein. Information has been obtained from sources believed to be reliable by Freedom Finance Cyprus Ltd or its affiliates and/or subsidiaries (collectively Freedom Finance). Freedom Finance do not warrant its completeness or accuracy except with respect to any disclosures relative to the Freedom Finance and/or its affiliates and the analyst’s involvement with the issuer that is the subject of the research. All pricing is indicative as of the close of market for the securities discussed, unless otherwise stated.