Italy finally has everything it needs for robust growth
Seize the moment regarding all those companies that will be recipients, to varying degrees, of public investment under the National Recovery and Resilience Plan (PNRR). This is the advice from Massimo Trabattoni, Head of Italian Equity, who recommends, however, looking beyond businesses benefiting directly from investment. These companies, in fact, may see almost immediate positive effects on their figures but there is a risk that they have already been priced in by the market. This is why it is recommended to broaden the scope to also include those benefiting indirectly from the PNRR.
“The priority is to identify companies that will benefit indirectly from the PNRR, acting on the basis of the improved positioning that they will gain in the market, rather than the launch of new services and markets, considering a time period that goes well beyond the four to six years set for the creation of infrastructure”, explains Trabattoni.
For example, a railway line can be built in five years, while the business that will carry out maintenance will have a 20 or 30-year contract: perhaps they will not even be involved during the construction phase, but over time they can rely on stable, recurring income.
This is an aspect that requires analysis in the context of significant public investment, a new factor for Italy. In fact, since the ’90s state budgets issued have always been focused on reducing public spending to remain within the parameters set by the European Union. “Today, we have entered a new phase with a return to investment and this represents a huge opportunity. This is even more significant as the use of these resources is planned by a government led by Mario Draghi, a credible, respected and internationally esteemed figure”, explains the manager. This framework thus guarantees that the plan presented will not be limited to a brief political season, but will see positive effects reverberating through coming decades. Furthermore, Brussels will monitor observance of time frames and targets of the PNRR, another element that explains renewed interest in Italy from international investors.
In this context, the value of active management is further highlighted, and therefore the capacity to analyse and recognise all those elements that may benefit from this fiscal impulse in the very short term, considering the entire range of possible investments in the Italian market. From large caps, where it will be necessary to observe both progress of reforms and sector trends at a global level to act at the right time, through to small caps, for which continual monitoring and dialogue with management will make the difference in understanding and anticipating any benefits from incentives and projects financed with Next Generation EU funds. In any case, any outperformance in Italy will be a long-term process, given that we are a market that follows the overall trend. What is important for investors is to choose a product suited to their risk profile and time horizon in order to have the certainty to be able to remain invested during periods characterised by upward trends and times of uncertainty, which will certainly arise.
In the meantime, as we await verification of PNRR developments, quarterly figures show a significantly encouraging situation for Italy as a whole. It is true that confirmation will be required in coming months, but if the Recovery Plan works, in four to five years in Italy, which struggled to grow by one percentage point per year, there could be a chance for recovery and to lay the foundations for significant growth that we are not used to seeing. The conditions are there, starting from an industrial fabric which sees Italy as a leader in many areas, both in Europe and globally. “If the conditions are established first in terms of orders, through highly visible public investment and then more widespread well-being, the years ahead could be far better than the past”, concludes the Head of Italian Equity.
Interview with Massimo Trabattoni, Head of Italian Equity.