7 Best German Stocks To Buy

Best German Stocks To Buy: Germany is the largest economy in Europe and one of the largest economies of the world. A highly industrialized nation and a technological powerhouse, it is home to a few of the world’s most well-known engineering and technology companies.

The country is also known for its multitude of World Heritage sites, rich cultural history and abundance of majestic monuments.

Germany as such is also one of the top tourist destinations of the world. You may know that but do you know the stocks of top German companies operating in myriad sectors ranging from automobile, engineering, software to finance and telecommunications.

SAP Is #1 In Europe For Enterprise Applications 

SAP SE [ETR: SAP] (abbreviation of “Systems, Applications & Products in Data Processing”) is a Germany-based multinational software corporation that makes enterprise application software and provides software-related services to manage business operations and customer relations.

The company is the market leader in enterprise application software. SAP operates through three segments:

• Applications,
• Technology &
• Services with regional offices and customers in more than 180 countries around the world.

SAP SE [ETR: SAP] is not only Germany’s but Europe’s most valuable technology company.

The ERP leader declared a solid set of results for the fourth quarter ended December 31, 2019. Cloud revenue jumped 39% to EUR 6,934 million, and total revenue jumped 12% to EUR 27,553 million.

Cloud and software as well as total revenue climbed 12% to EUR 23,014 million. Buoyed by the solid results, the company raised its revenue and profit outlook under new co-CEOs Jennifer Morgan and Christian Klein, who took over from long-time CEO Bill McDermott in October.

SAP lifted its guidance and now expects the adjusted operating profit to increase anywhere between 8% and 13% in 2020, while remaining optimistic about its ambition of achieving 35 billion euros ($38.8 billion) in revenue in 2023.

Operating profit fell 21% on account of the restructuring exercise and cost of $8 billion incurred owing to the takeover of Qualtrics in 2018, which specializes in measuring customer sentiment.

Cloud computing is the core of SAP’s operations these days and a critical part of its booming revenue. Investors remain optimistic that the company’s strategic direction will remain fruitful in the coming years and that it is going to continue to perform exceptionally with a new long-term strategy focused on organic growth and improvements in efficiency.

Investors’ sentiments remain strong with analysts setting 12-month price forecasts for SAP SE to be around 146.00, which represents a +32.40% upside from its current price.

Linde Is The World’s Largest Natural Gas Supplier

Linde plc [ETR: LIN], formed by the merger of Linde AG of Germany and Praxair of the United States, is a world leading supplier of industrial, process and specialty gases.

It is the world’s largest industrial gas company by market share as well as revenue. Linde operates in two business segments:

• Gas and Engineering, and
• Materials Handling

The company produces industrial and medical gases such as oxygen, nitrogen, argon, rare gases, carbon monoxide and carbon dioxide, among others. It also designs and constructs turnkey plants for gas production, and is one of the biggest manufacturers of industrial trucks in the world. Linde has a market capitalization of $80.98 billion.

Linde plc [ETR: LIN] clocked sales of $28 billion (€25 billion) in 2019, and generated strong operating cash flow of $6.12 billion, which included more than $800 million of merger-related cash outflows. The company invested $3.7 billion in capital expenditures and paid dividends of $1.9 billion.

In addition, Linde repurchased $2.6 billion of stock, reported its fourth-quarter income from continuing operations of $507 million and diluted earnings per share of $0.94. Its fourth-quarter operating cash flow of $2.17 billion increased $302 million versus the third quarter, primarily driven by improved working capital.

Apart from the solid results, Linde warrants your attention because of its solid dividend history and hefty yield.

The company has an impeccable five-year dividend history with consistent dividend increases over time. It has never missed or lowered dividend and its current annualized dividend is $3.852/share, currently paid in quarterly installments, and its most recent dividend ex-date was on 03/05/2020.

Analysts’ one-year target prices for Linde’s stock range from €142.00 to €235.00. On an average, they anticipate Linde’s share price to reach €200.65 in the next twelve months, an upswing of 33% from the stock’s current price.

ALLIANZ Is An Insurance Powerhouse

Allianz SE [ALVG.DE] is a European multinational financial services company. The Munich, Germany-based company provides property-casualty insurance, life/health insurance, and asset management products and services to over 100 million customers in more than 70 countries.

Allianz SE [ALVG.DE] is considered to be a dividend rock star and not without apparent reasons. In the past one decade, the insurance provider has taken its dividend payouts from €3.5 to €9. Its dividend yield stands at 4.5%, which is unusually high for insurance stocks, and puts in top 25% of dividend payers.

It has a solid record of continuously increasing its dividend payouts over the years without fail. The best thing is that with a trailing twelve-month payout ratio of 52%, it possesses the ability to pay the current rate of dividends from its earnings, which means it can go on paying dividends in the years to come without any glitch.

However, recently the stock price of Allianz [ALVG.DE] has been soaring, which has had a rather negative effect on the dividend yield. The corona pandemic has had a somewhat sobering effect on its share price, opening a new window of opportunity for further buying.

With a market cap of €84 billion and an excellent operating performance, the company has the wherewithal to absorb the corona shock to a greater degree.

The insurance powerhouse reported an annual operating profit of €11.9 billion for 2019 and total revenues of €142.4 billion. It also recently announced a share buyback program amounting to €1.5 billion.

Analysts expect Allianz’s stock price to reach €234.79 in the next year, representing an upswing of over 52% from the stock’s current price.

Siemens Is The #1 Industrial Manufacturer In Europe

Siemens AG [ETR: SIE] is a German multinational conglomerate company focused on the areas of electrification, automation, power, transportation, transmission and digitalization.

The largest industrial manufacturing company in Europe with a global presence, Siemens is one of the world’s largest producers of energy-efficient, resource-saving technologies.

The Munich-based company is also a renowned name in the manufacturing of medical diagnostics equipment. It also plays a pioneering role in infrastructure and industry solutions.

Siemens AG [ETR: SIE] Q1 FY 2020 results struck a downbeat tone. Orders at €24.8 billion declined 2% from the strong prior-year level. Net income declined 3% to €1.1 billion and its adjusted EBITDA from the company’s industrial business dropped to 1.43 billion euros.

Revenue fell 1% to 20.32 billion euros. The German conglomerate offered a cautious tone for 2020, warning of a stuttering global economy and a slowdown for its short-cycle automotive and machinery products. However, despite the near-term headwinds, the stock of one of the largest engineering companies in the world holds good long-term value.

The company has a solid balance sheet, good liquidity and strong ability to meet its financial commitments. Siemens also is committed to investment in renewable energy, which bodes well for the company.

It recently announced the purchase of Iberdrola SA’s 8% stake for 1.1 billion euros ($1.2 billion). Iberdrola is a Spanish multinational electric utility, which specializes in clean energy and is the number one producer of wind power.

The bond market is buying two-to-five-year Siemens corporate bonds on a slightly negative yield, implying that it is the right time for equity investors to delve in and buy the stock for its yield alone

All in all, if you are prepared to digest some bad news that looms on the horizon with expectations of low earnings, Siemens looks like a good value for income seekers.

Volkswagen Is The Largest Automaker By Sales

Volkswagen AG [ETR: VOW3], known internationally as the Volkswagen Group, is a German multinational automotive manufacturing company.

The Wolfsburg, Germany-based company is one of the world’s leading manufacturers of automobiles and commercial vehicles. The company operates in four segments:

• Passenger Cars,
• Commercial Vehicles,
• Power Engineering, and
• Financial Services.

The world’s largest automaker by sales, Volkswagen owns brands like Audi, Lamborghini, Porsche, SKODA, Bentley, Bugatti and Scania, among others.

Investors currently are not exactly lining up for the auto industry and Volkswagen AG [ETR: VOW3] is no exception to it.

Most auto stocks suffered a major thrashing in the late-2018 market sell-off, and a few of them are yet to fully recover from the clobbering. This means that stocks of many companies are still selling at surprisingly low prices.

What caused Volkswagen AG greater harm was its unfortunate involvement in a massive diesel-emissions cheating scandal in 2015.

The automaker continues to suffer from the consequences of that incident, still paying fines, recalling its vehicles and fighting court cases. It has cost the company billions of dollars, thereby severely denting its bottom line.

The good news is that the German automaker is now seeing light at the end of what was a long tunnel, and both the company and investors can look forward with optimism.

The company is aggressively shoring up its battery-electric vehicles production capabilities. Its first mass-market long-range BEV, the VW ID3, is all set to go into production with several more expected to follow over the next few years. The automobile giant expects to annually sell around 3 million EVs per year by 2025.

Also, the company’s SUV and luxury vehicle sales (it owns brands like Audi, Porsche and Bugatti) are climbing. With the diesel scandal more or less over, Volkswagen’s margin and operating cash flows are going from strength to strength.

Operating income before one-time items in 2019 rose to 19.3 billion euros ($21.19 billion), an upswing of 12.8% from a year ago. Revenue rose 7.1%.

The company recently announced that it was preparing to shut down all of its European factories due to the spread of the novel coronavirus. The lingering effects of the pandemic are impossible to predict right now, but VW’s projections for bottom-line growth over the next five to seven years look respectable.

Deutsche Telekom Has Almost 200 Million Customers

Deutsche Telekom is one of the world’s leading integrated telecommunications companies, with some 184 million mobile customers and 21 million broadband lines.

Deutsche Telekom AG [ETR: DTE] is one of the world’s leading integrated telecommunications companies, and by revenue the largest telecommunications provider in Europe.

The German telecommunications company operates several subsidiaries worldwide, including the mobile communications brand T-Mobile.

The company has over 184 million mobile customers, around 28 million fixed-network lines and 21 million broadband lines. Deutsche Telekom AG was founded in 1995 and is headquartered in Bonn, Germany.

Deutsche Telekom AG [ETR: DTE] has been currently making headlines because of the merger of its subsidiary T-Mobile and Sprint Corporation in the United States.

The $26.5 billion merger, which is expected to cover 70 percent of the US with 5G by 2023, could jump-start its 5G ambitions.

The good news for investors is that Sprint and T-Mobile have agreed to modify their merger deal arrangement to give Deutsche Telekom more ownership stake in the newly combined company.  SoftBank and Deutsche Telekom will hold 24% and 43% of shares in the newly combined company respectively.

Also, Deutsche Telekom reported good annual results for 2019. Net revenue increased by 6.4 percent to EUR 80.5 billion. Net profit jumped approximately 80 percent to EUR 3.9 billion and free cash flow grew by 15.9 percent to EUR 7.0 billion. The company has fixed 60 cent per share dividend for the fiscal year 2019.

An important thing to note is that dividends paid to shareholders in Germany are exempted from German capital gains tax. DTE expects adjusted EPS to grow from €0.96 in 2018 to around €1.2 in 2021, and revenue to grow by an annual average rate of +1 to +2% from 2017 to 2021.

At the moment, Deutsche Telekom is in a state of change, which may bring short-term pains for investors. However, with a positive growth outlook and low valuation, it is the right time to invest in the German telecommunications behemoth.

BASF Is #2 Chemical Producer Globally

BASF SE [ETR: BAS] is a German chemical company and the second largest chemical producer in the world. The BASF Group comprises subsidiaries and joint ventures in more than 80 countries, and has customers in over 190 countries.

The Ludwigshafen, Germany-based company supplies products to a wide variety of industries, including electrical, electronics, paper industries, furniture, construction, agriculture, oil and plastics, among others.

BASF SE [ETR: BAS] is going through turbulent times as the chemical industry suffers from the coronavirus pandemic. The German behemoth warned that the outbreak could lead to slowdown in production on a scale not witnessed since the financial crisis of more than a decade ago.

The company has warned that the economic shock inflicted by the virus, particularly in the first and second quarters, is highly unlikely to be fully offset during the remainder of the year. The obstruction comes when the company is undertaking construction of a new $10 billion complex in the Chinese city of Zhanjiang—a country where the virus originated.

To make matters worse, BASF generates 20% of sales from the automobile industry—a sector which is itself struggling.

Despite cash flows falling by 465 million euros last year, BASF still increased its five-year investment guidance to 23.6 billion euros. The company suffered 29% decline in 2019 earnings, which brings into question how the company is going to use the proceeds of two large disposals worth almost $5 billion.

The company is banking on self-help measures, including job cuts and other cost-reduction procedures, to increase profit by two billion euros by the end of 2021.

There is high uncertainty about whether chemical demand will pick up in the later part of the year, but analysts’ long-term stance on BASF remains positive.

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The author has no position in any of the stocks mentioned. Financhill has a disclosure policy. This post may contain affiliate links or links from our sponsors.