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3 Stocks In Focus As Italy Political Crisis Rattles Market

Published 05/30/2018, 08:33 AM
Updated 07/09/2023, 06:31 AM

The recent political development in Italy has unexpectedly raised concerns across investors communities throughout the globe.

Italy, Eurozone's third-largest economy, is witnessing a political turmoil involving a power struggle between the Eurosceptic populists and the pro-European Union (EU) establishment politicians. Italy’s President Sergio Mattarella has rejected the appointment of populists’ Paolo Savona as the economy minister after he advocated Italy to exit from the euro but not EU.

With growing fears about future of the euro and that Italy will be forced to hold a new general election, Mattarella has asked Carlo Cottarelli, a former International Monetary Fund official, to form a new government, on an interim basis

Cottarelli stated that fresh elections will be held in early 2019 or after August this year if he fails to survive a confidence vote in the Parliament, although the latter appears to be the most likely, given the present scenario.

The political crisis in Italy led to a global stock market sell-off on May 29, cut the euro to a 10-month low and spiked borrowing costs for the government in Rome.

How the U.S. Financial Market was Affected

Such political uncertainty in Italy has swayed in negative sentiments among U.S. investors, after the Memorial Day weekend.

On May 29, post trading, the Dow Jones Industrial Average plunged 391.64 points (1.58%) to $24,361.45 amid losses faced by Goldman Sachs (NYSE:GS), Boeing (NYSE:BA) and JPMorgan Chase (NYSE:JPM).

The S&P 500 Index lost 31.47 points (1.16%) to close at $2,689.86 while the Nasdaq Composite fell 37.26 points (0.5%) to $7,396.59.

The Financial Select Sector SPDR Fund was down 3.34%, below its 200-day moving average.

The euro plummeted below $1.16, its lowest level this year against the U.S. dollar which continued to rise in Italian debt rates. Italian debt is the second-highest in the EU. The government debt burden of €2.3 trillion is a colossal 132% of GDP.

Stocks extended their losses during Tuesday's trading hours. The losses reflected the third straight trading session of negative numbers for the Dow and S&P 500, both of which performed their worst on a percentage basis since Apr 24.

Top 3 Italian ADRs

As the equity markets appear quite shaky due to a political turmoil, betting on some outperformers with favorable Zacks Rank and healthy fundamentals could be a great idea for investors. These stocks seem to hold great promise for the future and are likely to reward shareholders generously. In order to benefit from the current market scenario, we have picked a handful of Italian American depositary receipt (ADR) stocks that have the potential to restore investors’ confidence.

Ferrari N.V. (NYSE:RACE)

Ferrari through with its subsidiaries, produces and sells luxury performance sports cars. The company currently carries a Zacks Rank #2 (Buy). You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here. The company has a healthy long-term earnings growth expectation of 17.3%. It topped earnings estimates twice in the trailing four quarters with a beat of 12.4%. Ferrari’s earnings per share estimates for the current year have moved north by 35 cents to $3.56 in the past 30 days.

Over the past six months, the stock has significantly outperformed the industry with an average return of 18.1% against a decline of 1.2% for the latter.

Eni S.p.A. (NYSE:E)

Eni is engaged in the oil and gas, electricity generation and petrochemicals business. The company currently has a Zacks Rank #3 (Hold). The company has a long-term earnings growth expectation of 16.2%. It has exceeded earnings estimates thrice in the trailing four quarters, the average being a positive 56.4%. Eni’s current-year’s earnings per share estimates have climbed 13 cents to $2.66 in the past 30 days.

The stock has outperformed the industry with an average return of 5.2% compared with growth of 3.8% for the latter in the past six months.

YOOX Net-A-Porter Group S.p.A. (OTC:YXOXY)

YOOX through its subsidiaries, operates as an online luxury fashion retailer. The company currently has a Zacks Rank #3 (Hold). Its earnings estimates for the current year have remained stable at 57 cents, in the past 30 days.

The stock has outperformed the industry with an average return of 29.1% compared with growth of 22.4% for the latter in the past six months.

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