Fund manager Felix Gode is optimistic about the midmarket and small caps in Germany. With his Alpha Star dividend fund, he focuses on small caps with leading positions in their markets. In this guest article, Gode analyzes the situation on the German stock market and presents two stocks from his portfolio.
Catch-up potential for German small capsThe situation on the stock markets has been quite interesting in the first weeks of 2023. Many investors are puzzling over how it is that German blue chips in particular are proving so robust. By way of comparison, since the beginning of the year, Germany's leading index, the DAX, has risen by 12%, while the U.S. Dow Jones has not even risen by 1%. The broader S&P 500 index is also clearly behind the DAX, with a gain of only 5%. Last but not least, German blue chips have also clearly outperformed small caps recently. Normally, it is the case that the DAX follows the pace set by the US indices. Not so at the moment. So what is the reason for this untypical price behavior?
Short squeeze at DAX companies Fund manager Felix GodeOver the past year, we have seen severe dislocations on stock markets around the globe. The reasons for this are obvious. The Ukraine war, inflation, along with rising interest rates, rising prices and shortages in commodities and inputs such as chips. A cocktail that suggested bad things to come. The stock markets have reflected precisely these fears and have gone down in the past year on a scale we have not seen for a long time.
Investors bet on a sharp recession as a result of the multiple challenges, and many market participants also bet precisely on this by taking large short positions on German companies. Cyclical companies in particular were the target. There are plenty of these in the DAX. We now know what has happened on the economic side since then. We are a long way from a sharp recession. At least up to this point. Rather, German companies have coped enormously well with the difficulties, and so the German economy as a whole has also performed valiantly.
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