Opportunities for stock picking emerge from AI concerns and the US-IRAN escalation

This is not the time to flee risky assets, but to buy on dips, selectively. Renewable stocks will soon return to the spotlight.

by Andrea Scauri, manager of the Lemanik High Growth fund

The military escalation between United States, Israel and Iran, which began on Saturday 28 February, has triggered a reaction of risk aversion in global markets, which so far has remained relatively orderly. The situation clearly favours the defence and energy sectors, while industrials and consumer-related stocks are more vulnerable, both because of rising energy/logistics costs and the impact on disposable income, and because of potential macroeconomic fallout. Much will depend on the duration, scale and intensity of the conflict, on the heightened risk of disruptions to energy supplies through the Strait of Hormuz, on the wider economic repercussions of the conflict and on the uncertainties surrounding the succession of Iranian leadership; the first reactions suggest a selective reassessment of risk rather than a blanket flight from risky assets.

We see many opportunities in this context. As always, when things change quickly, there are winners and losers. And we are very confident in our ability to pick stocks, reading beneath the surface. Who are the winners? We believe that a strong rotation into renewable energy stocks is the key in Europe, and we have acted accordingly. We believe that, after years of downgrading, the sector will return to the spotlight, given the clear need for the European Union to be less dependent on imported oil and gas from both the United States (via LNG) and Russia/the Middle East. We expect new investments to be encouraged by higher allowed returns and supportive regulations.

Outlook and positioning: buy the dip, but selectively - So far, the situation in the Middle East is anything but under control, and the Strait of Hormuz remains closed. The worst-case scenario is now entering its second week, with overnight reports of direct attacks on tankers in the Gulf sending oil prices back toward the $100 threshold. Therefore, it should come as little surprise that risky assets will once again come under pressure. The United States, and Trump in particular, will very soon have to find a way out, because the self-inflicted global economic damage being caused is undermining above all the chances of victory in the midterm elections, and this is the most important issue for Trump. The odds of the Democrats taking the House of Representatives are already at 85%, but since the start of the war the odds of taking the Senate have risen from just over 30% to nearly 50% now. If the Democrats win both chambers, Trump will most likely have to face impeachment again. This will have a decisive influence on the US administration's future decisions.

Our point is to understand whether the market will force the US government to act. We believe the pain threshold is close to the extremes we saw on Monday the 9th. Therefore, if we were to test those levels again, we would want to use them as buying opportunities for risky assets. In addition, we continue to observe a high level of risk aversion, as measured by the ongoing demand for protection or by various positioning indicators from other brokers. According to GS, short exposure in US macro products is at levels last seen in 2022. Therefore, if we are right and another move toward risk aversion creates enough pain to expect a resolution, this could trigger significant easing and short covering. The economic impact of the closure of the Strait of Hormuz is huge. It is not just about oil. Taiwan Semi, for example, will have to cut chip production, as it will no longer receive helium from Qatar. The damage will simply be too great not to find a way out.

Why do we suggest buying the dip? First, Trump does not have public opinion on his side; second, there are the midterm elections, and we do not believe Trump can afford to reach November with the stock market in tatters, so the war must end soon. Our preferred themes include renewable energy, as mentioned earlier, STM and Saipem. We have recently added Stellantis in the wake of very negative recent news regarding write-downs that have brought the share price to levels we consider a very attractive entry point.

Telecom Italia Svg remains a key position in the wake of the solid investment case, supported by a better competitive landscape and much more straightforward governance with the entry of Poste Italiane. We are very selective on financials, with a preference for BPER and BMPS. Infrastructure, driven by the investments planned by the German fund for the energy transition, digital and infrastructure renewal (Danieli Sav.). As for the Defence sector, we maintain our exposure after the weakness of Q4 2025. The positions are weighted toward names such as Leonardo, but we recently rebuilt a position in Fincantieri after the placement.