Few pearls for investors: These stocks created the most value

As of: 01/18/2023 3:07 p.m

The bottom line is that many German stocks have not brought investors any money over the past 20 years. A new study shows which papers are best for investors.

In the past 20 years, 1.7 trillion euros in value have been achieved through price gains, dividends and share buybacks. This is the result of a new study by the Flossbach von Storch Research Institute, a think tank of the Cologne-based asset manager with around 70 billion euros in managed customer money.

However, since January 2003 many German stocks haven’t brought investors any money. The majority of the value created for investors on the German stock market is accounted for by very few stocks – twelve stocks accounted for half of the total value created.

Investors did particularly well with this DAX group

“Only a few large, mostly well-managed companies in attractive sectors dominate the German stock market,” says study author Philipp Immenkötter. “They have been listed for a long time and have grown over the years.”

According to the study, the DAX companies Siemens, SAP, Allianz, Mercedes-Benz Group and Deutsche Telekom created the greatest value for investors with over 75 billion euros each. It was followed by BASF, BMW, VW (common shares), Munich Re and Deutsche Post.

That’s how important the dividend is to adding value

It is no coincidence that the companies mentioned are also among the major dividend payers in the DAX. Because the study also underlines the importance of the dividend for the increase in value of a share: At 882 billion euros, more than half (52.2 percent) of the total value created was attributable to dividends.

A further EUR 117.9 billion (7.0 percent) was paid out to investors through share buybacks. Only 691 billion euros and thus less than half (40.9 percent) were due to share price increases.

Deutsche Bank is the biggest destroyer of value

Meanwhile, the inglorious title of the biggest destroyer of value on the German stock market goes to Deutsche Bank: Germany’s largest money house destroyed a value of 24.8 billion euros in the past 20 years and thus ended up in last place (1013).

In addition, the papers of Commerzbank and the real estate financier Hypo Real Estate Holding were among the biggest value destroyers. The insolvent payment service provider Wirecard came in 938th place.

Federal bonds as a benchmark

For the study, all 1,000 shares of German companies that were publicly traded in the Prime Standard and General Standard segments of Deutsche Börse between the beginning of 2003 and December 2022 were analyzed. The experts measured the value creation of the shares against the yield on Bunds with a remaining term of one month in order to create a comparison with very short and safe investments.

Stock returns above those of such Bunds were defined as value creation. The start of the study was set for January 2003, so that the stock market was examined from a low after the collapse of the Neuer Markt.

Warren Buffett recommends ETFs

It is well known that investors take high risks with individual stocks, even in large corporations. Experts therefore advise spreading stock market investments very broadly and globally – for example with funds or cheap exchange-traded index funds (ETFs) that do not require a fund manager.

Even investor legend Warren Buffett advises investors not to pick individual stocks, they should rather invest in a low-cost ETF on the S&P 500. His thesis: Most investors will not outperform the market-wide US index anyway. In his will, the “Oracle of Omaha” decreed that 90 percent of the cash his family will inherit should go into an S&P 500 ETF. The remaining 10 percent will go into government bonds.

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