Amgen is popular with dividend investors due to its long-term dividend history. (KI Photo: freepik, vecstock)
Technology (Nvidia, Microsoft) and communications (Google, Meta) were the profitable sectors on the stock market in 2024. Energy, raw materials, utilities and healthcare, on the other hand, were hardly able to participate in the rally in 2024. Now the picture should turn in 2025.
The valuation gap between sectors has increased. Technology and communications are historically highly valued, while sectors such as energy, materials and healthcare currently have lower valuations. These lower valuations, combined with improving growth, could boost these sectors.
The energy sector recorded an 11 percent decline in profits in 2024, while growth of 14 percent is forecast for 2025. A similar picture emerges for raw materials (2024: minus 3 percent, 2025: plus 18 percent).
The healthcare sector has also largely reduced the overvaluation from the time of the corona pandemic, which could stimulate investor interest again. While profit growth in the healthcare sector was only 5 percent in 2024, an increase of 19 percent is expected for 2025.
Cyclical upswing: regional differences
According to experts, global profit growth is in a cyclical upswing. North America in particular could benefit, as the economic policy environment is favorable with the change of government and falling interest rates. Cyclical sectors such as energy and raw materials could benefit particularly strongly in this environment.
Europe has opportunities and risks depending on the region. Germany is struggling with growth problems, while countries in Eastern Europe such as Poland will continue to grow. China remains threatened by a weak economy, geopolitical risks and possible tariffs. Japan, on the other hand, should continue to recover because share buybacks are still ongoing and Japanese consumption is stable.
Donald Trump will cause market volatility
Already in his first term in office, Donald Trump moved the stock markets with his tweets and statements. This unpredictability leads to more volatile markets for investors. This volatility is both an opportunity and a risk. If Trump raises tariffs and tightens immigration policy, there could be new interest rate hikes as the US economy is at capacity. However, Trump’s words often differ from his actions.
Stock idea – infrastructure: CRH plc
Cement Roadstone Holding plc (CRH) is an Irish company and the largest building materials company in Europe and North America. Through strategic acquisitions and organic growth, CRH is now active in the distribution of lower carbon cement, warm asphalt, concrete and construction products in 28 countries on 4 continents.
A special feature is the vertical corporate strategy with an end-to-end solution. In addition to providing the raw materials, CRH designs, builds and maintains the corresponding solutions. The company not only serves the infrastructure sector, but also the residential and commercial construction sectors. The infrastructure measures in the USA play into CRH’s hands.
Double-digit earnings growth and single-digit revenue growth are expected for the next 2 years, while the current Price-earnings ratio (P/E ratio) is only 16 and the EBIT margin is 13.5 percent. Debt is reasonable with a net debt/EBITDA ratio of 1.7.
The US listing at the end of 2023 was and is a special price catalyst. Since then, the share price has already increased significantly. However, a comparison with its largest competitors Martin Marietta Materials (P/E 27, earnings growth 4 percent) and Vulcan Materials Company (P/E 32, earnings growth 14 percent) shows that CRH plc is still at a clear discount to the competition in terms of better financial indicators (debt, margins) is traded.
Usually the valuation adjusts to the peer group after the US listing. Accordingly, CRH plc, as a quality company in the infrastructure sector and given the existing valuation discount, has significant upside potential in 2025.
Stock idea – health: Amgen
Amgen is popular with dividend investors due to its long-term dividend history. 2024 did not bring a special end to the year for Amgen. But that could change in 2025. After the share price decline of around 20 percent, the biotechnology company is with one Dividend yield of 3.3 percent there.
Amgen impresses with a strong product portfolio, particularly with the asthma drug Tezspire, which was developed in partnership with AstraZeneca. Sales of this drug increased by 67 percent last year. Furthermore, growth is supported by the acquisition of Horizon Therapeutics.
Thanks to these growth drivers and deleveraging from the Horizon acquisition, including a 32 percent increase in free cash flow, Amgen is expected to continue increasing its dividend. Amgen is also interesting due to its intensive research and development strategy and the weight loss drug MariTide.
Disclaimer:
Not investment advice. No call to buy or sell securities.