The best of the CAC 40 and beyond

Defence companies Thales (Paris: HO) and Dassault (Paris: DSY) have seen their shares rise dramatically this year and the shares are now pricey. The world is investing heavily in weaponry, but Nato countries that plan to increase spending, such as Germany and Poland, tend to buy American fighters or weapons rather than French. Mining and metals firm Eramet (Paris: ERA), long seen as struggling, has also seen its value nearly double since the beginning of the year thanks to the commodity boom.

Clean energy is probably a better place to look. Notwithstanding Renault’s (Paris: RNO) Russian disaster, note that the firm plans to spin off its electric arm (like Volvo with Polestar) in the hope of achieving a Tesla-like valuation. Furthermore, Macron promised more subsidies for the leasing of electric cars. That could benefit leasing company ALD (Paris: ALD). Renewable energy firms Volatalia (Paris: VLTSA) and Neoen (Paris: Neoen) will benefit from increased investment in the sector.

Macron has also emphasised energy preservation and house insulation. That will favour a company such as Rexel (Paris: RXL), which distributes a wide range of equipment, including renewable energy and energy efficiency products. It looks cheap on an enterprise value/earnings before interest, tax, depreciation and amortisation (EV/Ebitda) of 7.5.

Oil major Total remains cheap because of its exposure to Russia. Being forced to hand over its assets would be extremely costly. I prefer Vallourec (Paris: VK), which provides pipes for the oil business and is down significantly over the last two years. Also consider CGG (Paris: CGG), which does seismic surveying for oil explorers, as well as oil firm Maurel et Prom (Paris: MAU), which is focused on exploration.

Luxury goods firms such as LVMH (Paris: MC) and Hermès (Paris: RMS) benefit from the global rise in inequality. They are among the largest listed French companies, along with beauty giant L’Oréal (Paris: OR). The sector remains strong and LVMH reported record sales of €62bn in 2021. That said, it’s not obviously cheap: its smaller peer Kering (Paris: KER) is valued at a more attractive ratio.

Strong food brands are able to transfer inflationary pressure to customers to preserve their margins. Danone (Paris: BN) has delivered many disappointing years but looks attractive now on an EV/Ebitda ratio of ten. Fleury Michon (Paris: ALFLE), a specialist in meats and ready meals, is on an EV/Ebitda of five.

Healthcare and pharmaceuticals are a key sector: packaged medicines represent 6% of French global exports. Many medical tests and treatments have been postponed due to lockdowns and the focus on Covid-19. Guerbet (Paris: GBT), which makes contrast agents used in medical imaging, could benefit from a rebound in screening, as could diagnostics firm Eurobio Scientific (Paris: ALERS). Clinical-stage biotech firm Acticor Biotech (Paris: ALACT), which focuses on treatment of thrombotic diseases, is also an interesting one to watch.