Low-priced blue-chip companies in green sectors expected to enjoy rally

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Vaccine-led normalization of economic activities will be stock market game changer in 2021

By Anna J. Park

While last year's stock market frenzy was mainly fueled by "BBIG" stocks ― the battery, bio, internet and gaming sectors ― so-called "VVIG" shares ― vaccine, value, initiative and green ― are expected to lead stock markets this year

The acronym represents investor expectations over a vaccination-led normalization of economic activities that will cause shares of environmentally-friendly companies to shine after remaining relatively undervalued.

Market insiders say BBIG stocks will continue to be popular this year. But they also say fast-changing global economic conditions due to ongoing vaccination schedules as well as the development of other treatments could significantly change the landscape of the stock market this year.

Samsung Securities said in a recent report that investors are now focused on finding blue-chip stocks with solid profit margins, yet have largely remained off the radar and whose prices have room for additional growth.

"One of the main reasons why global stock markets continue to rally is people's expectations of economic activities returning to normal soon thanks to global vaccinations," analyst Shin Seung-jin from Samsung Securities stated in the report.

"Vaccines are a game changer; investors will focus on finding quality companies whose prices haven't risen much lately," the analyst added. "The recent rise of cyclical stocks whose book values remain low shows such a trend among investors," the report said.

However, the report stressed that simply being a value stock ― meaning it is underpriced compared to what the company is actually worth ― will not be enough to lead the market in 2021. It said companies that are already thriving with handsome profit margins in trendy sectors like environmentally-friendly industries, yet somehow have not been noticed by investors, will start to shine.

The report's recommended stocks that fit into that category are SK Innovation, LG Chem, LG Electronics, Samsung Electronics, Kia Motors, Samsung C&T and Hanwha Solution.

SK Innovation saw its price rise by some 35 percent so far this year, as the company's stock is relatively undervalued among rechargeable battery manufacturers in Korea. Market insiders predict once the final verdict of an ongoing legal patent battle with LG Chem comes to an end, the stock price could further soar as market uncertainty dissipates.

Samsung C&T is estimated to be one of the undervalued affiliates of Samsung Group. Analysts say Samsung C&T's considerable stake in Samsung Electronics and Samsung Biologics have not been priced into its value yet. The firm's policy direction towards strengthening dividend payouts could also positively affect the stock price.

Kia Motors and LG Electronics also have the potential to be reevaluated as one of the key electronic vehicle platforms, as their business strategies focusing on the EV sector could bring more growth.

Hanwha Solution's investments in green energy sectors and carbon-free industries are also expected to yield tangible results in the near future, as the incoming Biden administration aims to strengthen sustainable growth areas.

"It's true that Korean company stocks have been subject to the so-called Korea discount, despite being top-ranked global companies in semiconductors and rechargeable battery markets," the report highlighted, saying these seven firms are expected to yield relatively more growth in their stock prices in 2021.

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