MILAN Oct 6 Italian premium brakes maker
Brembo's debut on the Milan blue-chip index on
Thursday highlights the stark contrast between some of the
country's lesser-known companies and its dismal overall stock
Italy is Europe's worst performing market so far this year
and some foreign investors have been so transfixed by the
Southern European country's macro-economic risks and political
turmoil they have missed the rise of niche firms like Brembo.
The benchmark FTSE MIB has slid 23 percent this
year, compared with a 19 percent rise in Brembo shares and a 14
percent fall in the FTSE Italia Mid Cap index.
Worries about banks and a stalling economic recovery have
been compounded by uncertainty around a Dec. 4 referendum on
constitutional reform, making investors wary.
But firms like Brembo, which supplies brake discs and
callipers for road and racing cars for automakers such as
Ferrari and Porsche, tell a different
David Marcus, CEO of U.S. based Evermore Global Advisors,
said Italy had long been neglected, but now the country was
undergoing big changes with firms improving the quality of their
management and focusing their businesses more than ever before.
"Italy has been a tomorrow story for many, many years but
these are fantastic times to be doing your homework because so
many investors are not looking there," he said. "We are not
required to invest there, but we want to. So over time we will
have more in Italy, not less."
Brembo has been surprising investors with
better-than-expected results quarter-after-quarter and its focus
on the higher-margin premium market has helped it weather the
storm that hit the auto industry following the 2008 financial
A firm that grew from a family-run mechanics' workshop in
1961 to a multinational with 7,700 staff across 16 countries is
now expanding into aerospace as a new revenue stream.
Brembo's core profit margin topped 17 percent last year,
while comparable stocks such as Italian car parts maker Sogefi
had a 7.7 margin and German tyre and auto components
maker Continental had a margin of 15.3 percent.
Brand strength, technological know-how and a focus on
exports are catching the attention of traders and fund managers
who highlight companies such as hearing aids maker Amplifon
, small appliance manufacturer De Longhi,
upmarket exercise machine maker Technogym or Energica
Motor, which produces supersport electric motorcycles.
Companies like air traffic controller Enav whose
business is regulated are also attracting interest, they said,
although December's referendum, which will decide on a
constitutional reform being pushed by Prime Minister Matteo
Renzi, looms large and investors may wait for that to clear out
before making big bets.
Piergiacomo Braganti, head of investments at Banca Albertini
Syz & Co, which manages around 3 billion euros ($3.4 billion),
said that while a "No" vote in the referendum could hit the
battered banking sector hardest, there could also be a spillover
to other more promising sectors.
That could be a good time to buy the quality names.
"If there's another indiscriminate sell-off we would be
ready to buy companies that have a competitive advantage or
operate in regulated businesses, Braganti said.
($1 = 0.8956 euros)
(Additional reporting by Agnieszka Flak; Editing by Alexander