The Dutch like to see themselves as an internationally oriented people who trade and travel around the world. But if you look at what they invest in – private investors, not the big pension investors – it’s striking that Dutch shares are still a favourite. In the top 10 of individual stocks in which they are invested, the first seven companies are of Dutch origin, according to a recent survey by De Nederlandsche Bank (DNB).
And although these seven – unlike before – are global trading groups, often with offices on virtually every continent, they are typical AEX companies or players from the main index of the Amsterdam Stock Exchange. Only in eighth place in the top 10 is a foreign company: Tesla, closely followed by Microsoft. When the Dutch invest abroad, it is primarily in American tech giants: in addition to Tesla and Microsoft, Apple, Alphabet and Amazon are also on the list of the twenty stocks they own the most.
But what other US stocks are interesting to consider now if you don’t want to end up with the above usual suspects? After all, many US stocks are now relatively cheap due to the mix of high inflation, rising interest rates, persistent supply chain shortages and the war in Ukraine. Admittedly, they are often not as cheap as European stocks, but still. For inspiration, here is a brief explanation of four American companies that stand out positively on the stock market according to Morningstar analysts.
Beyond Meat: in fashion at fast food chains
Economic Moat: None
Fair value: $72
Today, even die-hard carnivores try a meatless hamburger or some other plant-based alternative to beef, pork or chicken. And now that Beyond Meat (BYND) has entered into a partnership with McDonald’s, the demand for these products will only increase, expects Morningstar equity analyst Erin Lash. For example, McDonald’s in the United States has already launched McPlant, a vegetarian hamburger, which will be available in the Netherlands from mid-September. With this, McDonald’s says it wants to serve the flexitarians, the growing group of people who only occasionally eat meat.
Beyond Meat also collaborates with Yum Brands, the franchise organization behind major American fast food chains such as Kentucky Fried Chicken, Pizza Hut and Taco Bell. Since these have locations around the world, analyst Lash expects Beyond Meat to bring in more than $200 million in additional annual sales by 2025.
The price of Nasdaq-listed Beyond Meat has been rising again in recent weeks, after a low of less than $24 in early July. On July 22, the closing price was $36.29, but that is still well below the Fair Value of $72, or the fair value that Morningstar assigns to the stock.
Walt Disney: Well done with transformation
Economic Moat: Wide
Fair value: $170
Also for The Walt Disney Company (DIS), the price has recently risen nicely, after the stock was just above 91 dollars on the New York Stock Exchange in mid-July. On July 22, the stock closed at $102.72, but that’s still well below the $170 fair value it’s worth, according to Morningstar analyst Michael Hodel, who oversees the telecommunications and media sector.
According to Hodel, among all parties involved in traditional media, Disney is the most well-received for a successful transition from cable to streaming. According to him, this is because Disney has a very extensive film library, well-equipped studios to record new own productions and franchise agreements. This allows it to offer consumers a wide range, from the family fare it is known for, to films suitable for an older audience.
The cable networks Disney works with, such as ESPN, are likely to lose more and more subscribers, according to analyst Hodel. But now they still provide Disney with a steady revenue stream that will help the company fund its streaming ambitions. Hodel refers to platforms such as Hulu and ESPN+, which will gradually replace traditional cable networks.
And don’t forget the revenue from the Disney parks, which will continue to attract many visitors as travel restrictions due to Covid-19 have all been lifted worldwide (except in China). Finally, Hodel also points to Disney’s own streaming service Disney+, which he says “continues to build momentum” worldwide.
Meta: it remains a profit cannon
Economic Moat: Wide
Fair value: $384
The parent company of Facebook, WhatsApp and Instagram continues to achieve insanely high margins of almost 50% with its core business – and these are Facebook and Insta ads, writes Morningstar analyst Michael Hodel.
Currently, the lower ad rates applicable to Reels – those are the short videos with music you can post on TikTok, Facebook and Instagram – are putting pressure on Meta’s ad revenue growth. But Hodel expects this price pressure to be temporary, just like the changes Apple has made to its iOS operating system.
Hodel believes that Meta (META) will continue to attract advertisers due to the large number of users of Facebook, Instagram and WhatsApp. Additionally, it will use more of its own user data to compensate for what it loses due to Apple’s stricter privacy rules.
There is a significant difference between Hodel’s Fair Value of $384 and the July 22 closing price of $169.27. Given Hodel’s positive view of Meta, there is upside price potential.
ASML: finally (more or less) affordable
Economic Moat: Wide
Fair value: €696
ASML (ASML) is on the favorite list of Abhinav Davuluri, Morningstar’s technology analyst at Morningstar. But isn’t it a Dutch company? Sure, but the chip machine builder from Veldhoven is not only listed on Amsterdam Euronext, but also on Nasdaq (ASML). Using this New York listing ASML can raise larger amounts on the American stock exchange. And they can use that to invest – because in the industry it operates in, you need a lot of capital.
For ASML, it was for a long time a very expensive share for private investors with a smaller budget. But recently, the share has actually become affordable again: at the beginning of July, the rate even fell to just above €400. On July 22, the stock had made another spurt up and closed it €522.
Fair value used by analyst Davuluri is €696 and it has everything to do with the unique position held by the main supplier of chip manufacturers such as Intel, Samsung and TSMC. ASML’s market share is dominant worldwide, especially in the most advanced segments of the chip market. competitors cannot match the market share in percentages and the advantage in technological know-how.
This unique position cannot prevent ASML from also suffering from the ongoing problems in global supply chains. As a result, ASML was able to deliver fewer chip machines than previously expected, meaning revenue is moving forward over time. ASML applies the rule that revenue may only be booked when a chip machine has been delivered to the customer in working order. In order to save time, ASML has decided to carry out the final test procedures at the customer instead of internally at the home base in Veldhoven.
Another factor is the current ban on supplying the latest (and by far the most expensive) generation of machines based on EUV (extreme ultraviolet light) technology to China. But ASML is still the only party in the world that can even build these EUV machines.
And the slightly older, less advanced generations of chip machines still generate a lot of revenue. Because many chip manufacturers manufacture such types of chips for applications where this technical standard is sufficient. This ensures that ASML has a great competitive advantage over its peers, which in turn leads to a high Fair Value.