The German DAX is a total return index of 30 selected German blue chip stocks traded on the Frankfurt Stock Exchange. Year-to-date the index is up 18%. An excellent return for the first four months of the year and this is after a 10% pullback from its high in mid-March.
Many investors are at the cross roads wondering if they should cash in on their profits or stay the course expecting the market to rebound from current lows.
My first point (and possibly the most important) is that an investor should look at the overall picture of his portfolio; that is the performance of the portfolio since inception and the reasoning why you had bought the constituents in your portfolio. Investors should not look at the performance of the markets short term. This will only lead to panic and irrational behaviour probably leading to a wrong decision.
Markets have corrected many times in the past and even though there are many reasons why the markets should continue gaining momentum, markets never go up in a straight line.
My opinion is to stay the course. The correction we have seen in the European equity market should be seen as an opportunity to add to positions rather than a reason to sell out. It is still too early to even start considering moving out of European equities for two main reasons. The first being that we are still at the initial stage of the business cycle and secondly, that the ECB for the first time in many years is actually doing something to solve things in Europe.
An investor should not discount the positive effect quantitative easing is expected to have on the European economy. There will always be minor hiccups which will increase volatility in the short term such as uncertainty about what is going to happen with Greece, the UK elections, the price of crude etc.
However, if history had to repeat itself, the positive impact of quantitative easing on European equities should continue to increase equity valuations. Do not forget that we are still at the beginning of a 19 month program.
The five best performing equities within the DAX year-to-date are as follows:
K+S AG - 28.15% up YTD (Price €29.35, Indicative gross dividend yield 3.07%)
K+S AG manufactures and markets within the fertilizer division standard and speciality fertilizers to the agricultural and industrial industries worldwide. In its salt business, the company produces de-icing salt, food grade salt, industrial salt and salt for chemical use.
Adidas AG – 27.87% up YTD (Price €73.75, Indicative gross dividend yield 2.03%)
Adidas AG manufactures sports shoes and sports equipment. The Company produces products that include footwear, sports apparel, and golf clubs and balls. Adidas sells its products worldwide.
BASF SE – 27.32% up YTD (Price €89.25, Indicative gross dividend yield 3.14%)
BASF SE is a chemical company. The Company operates in six segments: Chemicals, Plastics, Performance Products, Functional Solutions, Agricultural Solutions and Oil & Gas. BASF offers products for the chemical, automotive, construction, agriculture, oil, plastics, electrical / electronics, furniture and paper industries, and provides a range of system solutions and services.
Fresenius SE & CO KGAA – 26.07% up YTD (Price €54.17, Indicative gross dividend yield 2.83%)
Fresenius SE & Co KGaA is a global health care group with products and services for dialysis, the hospital and the medical care of patients at home. The Company sells dialysis, infusion, transfusion, and diagnostics equipment and systems, blood separators and plasma and hemofilters, nutritional liquids, and solid and liquid pharmaceuticals.
Volkswagen AG-Pref – 26.00% up YTD (Price €233.10, Indicative gross dividend yield 2.08%)
Volkswagen AG manufactures economy and luxury automobiles, sports cars, trucks, and commercial vehicles for sale worldwide. The Company produces the Passat, Golf, Cabrio, Jetta, GTI, Beetle and other models. Volkswagen also owns Audi, Seat and Skoda, which manufacture and sell cars in Spain and in southern and Eastern Europe, and Lamborghini, which makes sports cars in Italy.