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04 May 2022
Lightside marketing feedback
Compagnie de Saint-Gobain SA (SGO:PAR), 0 | Wienerberger AG (WIE:WBO), 0 | Sika AG (SIKA:SWX), 0 | Ferguson Plc (FERG:LON), 17,348 | Travis Perkins plc (TPK:LON), 728 | Geberit AG (GEBN:SWX), 0 | Kingspan Group Plc (KRX:DUB), 0 | ROCKWOOL A/S Class B (ROCK.B:CSE), 0 | Armstrong World Industries, Inc. (AWI:NYS), 0 | Trex Company, Inc. (TREX:NYS), 0 | Owens Corning (OC:NYS), 0 | Ibstock Plc (IBST:LON), 152 | Forterra Plc (FORT:LON), 174 | Armstrong World Industries Inc Shs Unsponsored Brazilian Depository Receipt Repr 1 Sh (AWII34:BSP), 0 | ROCKWOOL A/S Class B (0M0A:LON), 0 | Invesco US Treasury Bond 7-10 Year UCITS ETF (TREX:LON), 0 | Wienerberger AG (0MKZ:LON), 0
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Lightside marketing feedback
Compagnie de Saint-Gobain SA (SGO:PAR), 0 | Wienerberger AG (WIE:WBO), 0 | Sika AG (SIKA:SWX), 0 | Ferguson Plc (FERG:LON), 17,348 | Travis Perkins plc (TPK:LON), 728 | Geberit AG (GEBN:SWX), 0 | Kingspan Group Plc (KRX:DUB), 0 | ROCKWOOL A/S Class B (ROCK.B:CSE), 0 | Armstrong World Industries, Inc. (AWI:NYS), 0 | Trex Company, Inc. (TREX:NYS), 0 | Owens Corning (OC:NYS), 0 | Ibstock Plc (IBST:LON), 152 | Forterra Plc (FORT:LON), 174 | Armstrong World Industries Inc Shs Unsponsored Brazilian Depository Receipt Repr 1 Sh (AWII34:BSP), 0 | ROCKWOOL A/S Class B (0M0A:LON), 0 | Invesco US Treasury Bond 7-10 Year UCITS ETF (TREX:LON), 0 | Wienerberger AG (0MKZ:LON), 0
- Published:
04 May 2022 -
Author:
Bromehead Yves YB | Roger Paul PR | Speak George GS | Whitworth Robert RW -
Pages:
3
Sector relative overweight position at risk near-term
Housing renovation names with an ESG twist have juiced up the lightside sector''s performance throughout the pandemic years. Investors have flocked into the sector and built considerable overweight positions relative to their respective indexes. This could change as investors consider the sector''s exposure to emerging macroeconomic risk. Investors have already started to trim the sector''s relative overweight position but selling flows could increase further if pressure on the volume outlook becomes more acute.
Positioning under a new paradigm
Portfolio concentration on the back of ESG constraints has exacerbated stock-pickers'' pressure to choose from a narrower list of ESG darlings across each sector. In the lightside universe, Sika, Saint-Gobain, Kingspan, Rockwool and Geberit form part of these ''happy few''. They are the most consensual names and likely to see some selling pressure as PMs de-risk away from the sector into defensives. However, discussions with investors suggest most still want to stick with the most counter-cyclical names, with Sika seen as the most defensive. Saint-Gobain is also well liked to play the value rotation, with a business model that is delivering higher returns and is becoming less cyclical.
What are clients avoiding?
Rising mortgage rates, housing affordability issues and increased macroeconomic risks have left EU and US housing exposed names (Wienerberger, Owens Corning) looking more vulnerable to a global sell-off. We are also starting to sense some nervousness around non-energy-saving renovation exposed names such as Travis Perkins, Ferguson and Trex.
Where are clients seeking refuge in this uncertain macro environment?
Investors are moving back towards defensive quality names including Rockwool post the sell-off, as well as Sika, which could benefit the most from normalising inflationary pressures in 2023.