Attijari Global Research (AGR) is urging investors to rebalance their portfolios by focusing on stocks with more attractive valuations and risk profiles. In its latest investment letter, AGR House View, the firm highlights the importance of choosing securities that offer a greater margin of safety in case the market faces a slowdown.
AGR advises that key risk factors should be taken into account when making investment decisions, including balance sheet health, margin sustainability, cash flow generation, and future earnings volatility.
Experience from stock markets shows that expensive stocks, particularly those that don’t perform well against these financial indicators, tend to have two major weaknesses: low profitability over long-term investment horizons (more than three years) and a higher vulnerability during market slowdowns or corrections.
AGR also points out that the Moroccan equity market has reached a historic milestone in 2024, hitting a record 14,449 points. The market has experienced a remarkable 49% surge since the lows of January 2023.
This exceptional growth over a span of just 20 months reveals two key observations:
. Stock prices have grown at twice the rate of profits between 2023 and the expected results of 2025.
. There is a strong appetite for growth stocks, with their valuations now reaching up to 30 times the projected earnings for 2024.
In light of these factors, AGR emphasizes the importance of recalibrating portfolios to favor stocks that are better positioned to withstand market corrections. This strategy is crucial to maintaining a solid return over the long term, particularly given the growing gap between stock prices and profits in the current market environment.
