Now is the time to playfully guess the 3 weakest performers on the Helsinki Stock Exchange for 2022. The guessing period is just over 2 weeks, until December 31, 2021. Someone already hinted that cash would be the most profitable asset in 2022, so I decided to start a thread thinking about what the biggest losers would be.
Healthy challenging is welcome, and justifications are appreciated.
Here are my 3 flop-top stocks, somewhat provocatively:
Savo-Solar
New issues seem to be coming again next year, and the company still isn’t getting into shape.
Harvia
We’ve enjoyed fully inflated multiples and earnings for a couple of years now. The order book is still full, but when orders stop coming in and sentiment simultaneously erodes, our beloved sauna heater company’s P/E ratio might drop back to around 15-20. In that scenario, with the E-component also decreasing, I estimate there would be at least 70-80% downside potential in the stock price.
Qt
The era of zero interest rates is over, and future cash flows will no longer be discounted with a 6% required return. Additionally, it turns out that Qt is not the winning long-term technology, and challengers are emerging. Are we currently in IT bubble number 2, and will Qt be revealed as a rerun of Nokia in 2000?
Fifax
I don’t think next year will be problem-free either, even though fish price indications look good now.
Lehto
The turnaround will take more time than one might think.
Kamux
Chasing growth is eating into margins, and the bottleneck in new car sales will continue until the end of the year, which also affects the availability of used cars.
Let’s go with the same line as the top thread, i.e., Nightingale, Spinnova, and Kempower, to the ground or to the moon, hardly in between. And an honorable mention to Modulight.
Herantis Pharma - Already a few disappointments in drug candidates, and the same trend continues.
Fifax - I have no faith in this at all, even though the price has come down quite a bit already.
Tuli & Kivi - This has risen so much, and we realize it’s no Harvia (a Finnish sauna and spa company).
E: changed “Savo” to get a slightly different line.
If we also consider it from a business perspective, then:
Savosolar - a safe bet
Lehto - another fairly safe bet
Betolar - some IPO this year will probably fail, and I chose this one.
The starting premise is that the bad ones will likely remain bad in the future.
If, purely from the stock price perspective, Qt could indeed fall significantly, even if revenue and profit growth remained even accelerating. However, Qt is still heavily in the portfolio, as there are unlikely to be any major cracks in the business.
Ah, what a start! If Harvia dropped by 80%, I’d mortgage my house, sell my car, and everything else I own. With the sauna market growing 5-10% annually, a lot would have to happen for order books to empty. But one can dream. How about you share the calculations that led you to that conclusion, @Laatumies
Digital Workforce Services Oyj - The company’s valuation is so full of hot air that even the management sold their shares on the opening day of the IPO. The reckless expansion of the sales organization everywhere only produces losses, and continuous services cannot be sold. They themselves don’t even know what they are actually doing; eventually, the company will disappear from the stock exchange without a trace, like a fart in the Sahara.
Efecte - Speaking of hot air, here’s another good candidate whose valuation will melt when the CEO’s reporting tricks and other nonsense no longer impress, and investors realize that product development has been forgotten, the Finnish market is saturated, and European expansion is just a pipe dream.
Kamux - Since this is a guessing game, I predict that Kesko will poach all of Kamux’s top performers, growth ambitions will be buried, and the company will run into problems.
Ah, so you’re assuming that Harvia’s revenue and thus its profit will drop to somewhere around 2019 levels with that -80% estimate. OK Of course the company has benefited from the pandemic and nesting at home, but at the same time the company has also grown inorganicallly with acquisitions like EOS, Kirami, Saunaeurox. Capacity has been increased by record amounts to meet market demand. As soon as Harvia is bearish, the following year the previous year’s valuations are eaten up again. The bears have been grinding the same for almost three years now. I also hope that with the sentiment we would get such a dip, so I could then rub my sweaty fingers on the cottage benches during retirement.
How about Kone, they’re at P/E +30 and the Chinese real estate market doesn’t look particularly euphoric right now.
The collapse isn’t coming next year after all. Inflation will recede on its own due to the bullwhip effect, and the FED looks like a skilled investor’s friend. There is no alternative. At the same time, the economy remains hot.
Yours,
20-40% cash since summer.
Edit. I should add that the stock market/global economy has been predicted to collapse every year since around 2016 when I started following the economy. And surely it was the same before that. Without constant worrying, my portfolio would be larger and my mind more refreshed.
In Rapala’s thread this week, there was a discussion with Inderes analyst Olli, who noted that defensive and proven consumer companies have historically been priced in the stock market at a premium of around P/E 20. Harvia could be considered one such company. With the 2022e forecast at the current share price, the P/E is 23. A lot would have to happen for the company’s P/E to drop to around 10. If weakness starts to show in Q4 2021 - Q1 2022, there will certainly be room for a decline. At the current valuation, there isn’t much room for error, and I wouldn’t have even started this discussion if you hadn’t pulled such a drastic -80% throw out of your hat
