European
Bargains Abound,
Thanks to Weak Euro
by Andrew Leckey
If
U.S. politics have scrambled your brains a bit lately, perhaps
it's time to take a break and go shopping in Europe. For stocks,
that is.
The abysmal-performing
euro currency and weak international markets have transformed
many European stocks into bargain-hunter's delights in 2000.
Of course, they'll remain bargains unless that regions moribund
currency shows signs of life and thus far no attempts to resuscitate
it have worked.
"If you've traveled
to Europe lately, you've found that everything you buy there
is relatively cheap, unlike years past when American travelers
felt like paupers when they went abroad," said Michael Levy,
lead portfolio manager for Deutsche European Equity Fund, the
top European stock fund with a 93.21 percent gain this year.
American investors
should think of European stocks in the same light, as a buying
opportunity with sound fundamentals.
In achieving remarkable
results that towered over competitors, Levy's fund invested in
small-cap initial public offerings and stocks of great companies
that were able to overcome the weakness of the euro.
Europe is hoping the
U.S. economic joy ride may slow down a bit next year, making
the euro more attractive in comparison. Then maybe money will
start flowing into Europe.
"A large part
of the euro's problem has been a big differential between a slow-growing
Europe and a fast-growing U.S.," says Gary Dugan, investment
strategist with J.P. Morgan Investment Management in London.
"If the U.S. starts to encounter problems, it could be a
deck of cards that is sliding away, while the euro should be
improving."
The new occupant of
the White House and the latest Congress will take some missteps
and the economy will pay for it, the experts speculate. Or maybe
the U.S. economy is due to come in for a landing anyway.
"A hard economic
landing in the U.S. next year is one thing we see that would
help to make the euro stronger," said Sharon Coombs, European
equity strategist with HSBC Securities in London. "We're
predicting two negative quarters of growth in the U.S. next year,
which constitutes a pretty mild recession, but is still much
weaker growth than we've seen over the past couple of years."
There are signs European
corporate earnings are on an upswing. "Eighty percent of
corporate earnings results from European companies have been
at or above expectations, while in the U.S. there have been more
nasty earnings surprises," observed Rosemary Sagar, head
of global investment for U.S. Trust. "In addition, if the
next era of Internet growth is going to be cellular-phone based,
the cell phone penetration rates are so high in Europe that there
will be very high growth."
If you're up for an overseas bet, here are some popular European stocks available to U.S. investors as American Depositary Receipts (ADRs):
- Nestle SA, the world's largest food manufacturer and a market leader in both coffee and mineral water, is recommended by Coombs and Dugan.
- Unilever NV, the international consumer goods company known for brands such as Birds Eye, Lipton and Dove, is suggested by Coombs and Dugan.
- Total Fina Elf SA, the international oil and gas company resulting from the recent merger of two large French firms, is a choice of Levy and Sagar.
- Vodafone Group Plc, a huge British telecommunications firm that acquired this country's AirTouch Communications mobile phone firm, is a pick of Levy and Sagar.
- Royal Dutch Petroleum, the global oil and natural gas producer, is favored by Dugan and Sagar.
- Aventis SA, a French firm with international sales of pharmaceuticals and agricultural products, is a pick of Dugan and Levy.
- AXA, a leading French firm in insurance and financial services that keeps acquiring companies, is a selection of Coombs and Sagar.
In addition, Coombs
likes electricity and waste treatment companies Scottish Power
Plc, Severn Trent Plc and United Utilities; financial services
firm Abbey National Plc; computer programming company Sema Group
Plc; telecom company Cable & Wireless Plc; and data communications
networking firm Energis Plc.
Dugan recommends gas
producer and distributor ENI SpA, as well as pharmaceutical firms
Novartis AG, Roche Holding AG and Schering-Plough Corp. Sagar
suggests telecom firms Ericsson Telephone and Telefonica SA;
insurer Allianz AG; facilities management firm Serco Group Plc;
and the oil company Lukoil. Another of Levy's larger holdings
is health-care and enzyme firm Novo Nordisk.
If you wish to place
investment bets outside the U.S., a good starting point is a
broad-based European stock fund.
Top-performing diversified
European stock funds in 2000, according to Morningstar Inc.,
have been:
- Deutsche European Equity Fund, New York; $31 million in assets; "no-load" (no sales charge); $2,500 minimum initial investment: 800-730-1313; up 93.21 percent.
- Ivy European Opportunities Fund, "A"
shares, Boca Raton, FL; $250 million; 5.75 percent load; $1,000
minimum; 800-777-6472; up 12.2 percent.
Franklin Templeton, Mutual European Fund, Class "A" shares, Short Hills, NJ; $1 billion; 5.75 percent load; $1,000 minimum; 800-342-5236; up 11.65 percent. - Driehaus European Opportunity Fund, Chicago; $48 million; no-load; $10,000 minimum; 800-560-6111; up 3.33 percent.
- Payden & Rygel European Aggressive Growth Fund, Los Angeles; $61 million; no-load; $5,000 minimum; 800-572-9336; up 2.8 percent.
Editor's Note: Andrew Leckey's column, "Successful Investing," appears regularly in the print version of the Bull & Bear Financial Report.
