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For good reason, of course. Investors are still nervous about the future for European equities, since no one yet knows how the debt crisis is going to play out. On any given day, fresh rumors abound regarding the dismal outlook of nations like Greece, Spain, or Italy.
For speculators with nerves of steel, the point of maximum fear is when you can often make your most lucrative bets. And big,Related Theme Articles:
, blue-chip European companies - the powerful multinationals that aren't going to disappear, no matter what happens to Portuguese bond yields - look to be on sale. With their U.S.-listed ADRs (American Depositary Receipts), buying shares is a snap.
Currency issues will play a role. If the Euro is in for a rough ride,Related Theme Articles:
, as many analysts predict, it could actually provide an earnings jolt for European megacaps. "By year-end we expect the Euro to trade closer to $1.10," says Christopher Vecchio, a currency analyst for foreign-exchange site DailyFX. "A weaker currency is generally supportive of European multinationals,The North Face, because it lowers production costs and helps exports."
Some of Pearson's favorites: Danish drugmaker Novo Nordisk,with its strong diabetes franchise, and Belgium's Anheuser-Busch InBev, the brewer behind Budweiser and Beck's. Both happen to be headquartered in Europe, but are worldwide cash machines that aren't about to be felled by any sovereign debt troubles. For 2010 InBev threw off the equivalent of $7.5 billion in free cash flow, and Novo Nordisk $2.8 billion.
As always with deep-value investing, you'll have to be prepared to sidestep falling knives. And in Europe, the sky seems to be full of them. As a result, it's probably wise to stay away from European financials for the time being, which are particularly exposed to the region's economic woes. Utilities should also give you pause - they're highly regulated and tied to particular regions.
NEW YORK (Reuters) - With the Standard & Poor's 500 Index off to its best January in 15 years, it's getting tougher to find cheap stocks in the United States. But it's not much of a problem in Europe.
Saddle up for a bumpy ride. If you do buy into Europe, don't expect volatility to decrease anytime soon. Ratings agencies are on the warpath, with Fitch recently downgrading the debt of five euro zone countries including Spain, Italy and Belgium. Until visibility becomes clearer,Coach Purses On Sale, it will take time for your bargain shopping to pay off. "Go in with a two-year time horizon," says Standard Life's Pearson. "The backdrop is still very uncertain, and you're going to be bounced around by the headlines for a while yet."
Sovereign default worries have made the region's shares the cheapest they've been to American investors since 2004.
Despite the currency ties,Discount Coach Bags, countries within Europe all have very different economic outlooks, though. Germany, for instance, is no Italy when it comes to its finances. As a result, stocks focused on Northern Europe will generally be less risky that those operating in the Mediterranean region.
"There are a lot of European companies that look attractive right now," says Stan Pearson, head of European equities for Standard Life Investments. "Focus on world-class companies with geographic diversification and strong balance sheets. Then you won't even have to make a judgment about the Euro, because those companies will be able to weather whatever happens."
Companies in the S&P Europe 350 are trading at around 10 times earnings for 2012, compared to 12.2 for the S&P 500. That means investors are getting a 20 percent-plus discount for looking across the pond.
If you're willing to take a risk on our beleaguered friends across the Atlantic, here's what investors should keep in mind:
Hot Stocks Asian Markets Money Related Quotes and News Company Price Related NewsInstead,North Face France, hunt for names with a healthy portion of their operations and profits overseas, and that boast manageable debt, solid earnings and decent yield. That's the kind of profile that attracts Robert Quinn, chief European equity strategist for S&P Capital IQ. One top pick: Telecom goliath Vodafone for its international breadth and reasonable forward P/E of 10.2 paired with a juicy 5.4 percent yield. Among sectors,Related Theme Articles:
, Quinn likes consumer staples, energy,Poppy Coach Bags, insurance and telecoms but is shying away from consumer discretionary and diversified financials.
Look for stocks that have taken an unfair beating. Limit your shopping to robust franchises where potential bad news is already baked into the numbers. German industrial giant Siemens has tanked 35 percent from last spring -- from $145 to under $95 -- making it low-hanging fruit for U.S. investors, according to Joe Tatusko, chief investment officer of wealth managers Westport Resources. It boasts low debt, lofty return-on-equity, and nearly half its sales are outside of Europe.
(Editing by Lauren Young and Andrew Hay)
An added bonus of investing in Europe: The average yield on equities is much higher than in the U.S. market - almost double, in fact. That should provide downside support,Veste North Face, and appeal to income-hungry baby boomers as well. France Telecom currently yields almost 13 percent, for instance, while oil giant Total offers 5.6 percent.
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