What investor is not frustrated by today’s stock market? The Dow Jones index is back to its 1997 level and it seems that things will never quite return to the way they were. Some investors believe that today only emerging markets in Asia or South America can provide real growth opportunities in the long run. They cannot be more wrong. One great example is France. Although the country is best known for its high tax level and its lack of labour flexibility, it is also a global leader in renewable and fossil energies.
France has hit the headlines more often since Nicolas Sarkozy was elected President in 2007. Sarkozy’s main goal during his presidency is to restore France’s power on the international scene. His strategy is very simple: to be a powerful country, France needs to have a strong military and/or global leading companies established worldwide. Obviously France is not going to catch up with Russia, China and the US in term of military power and as a result Sarkozy has focused on developing and selling France’s best assets: its businesses. Subsequently, that translates into important growth opportunities for investors.
In 2007, Sarkozy had one bastion of economic clout; France was a global leader in nuclear technology at a time when global warming and high oil prices started to be a real concern. France is viewed as an excellent example of an energy independent state, with more than 70% of its energy consumption coming from nuclear energy. Sarkozy was quick to realize the importance of nuclear technology in an environment of high commodity prices and he capitalized on it. Early in his presidency, he met with CEOs of Areva, Total, Alstom, EDF, GDF, Suez and Bouygues. It is hard to know exactly what was discussed, however given that Bouygues took a 21% stake in Alstom and GDF merged with Suez within a relatively short time span after the meetings, it could be assumed Sarkozy wanted to mold the corporations into global leaders in nuclear energy.
Sarkozy has never hidden his admiration for the US and UK capitalistic system, and even though the recent financial crisis forced him to back up on its very aggressive reforms agenda, the French President is continuing to implement its strategy. Recently the French Government lent $3bn to French Banks to make sure Airbus customers will be able to get the financing needed to buy Airbus plane in 2009. He is also expected to land one of his closest men as CEO of EDF in 2011 to better control the decision making in the company. In the mean time, he continues to sell France’s technologies and already has signed contracts to build power plants in China, Brazil, Qatar, Libya and the UAE.
President Sarkozy’s strategy is clearly targeting the following companies:
- Areva (OTCPK:ARVCF): A global leader in nuclear energy. The company is building the 3rd generation nuclear plant in Finland and has many more projects already signed in China, Middle East and the US.
- EADS (Airbus) (OTCPK:EADSY): The company struck out with its new plane A380. In 2008, Airbus has signed more contracts than Boeing and seems to be less affected by the crisis.
- Alstom (OTCPK:AOMFF): Has developed some of the world’s best technologies for high speed train (TGV), steam turbines, and gas turbines. The company is viewed as the best candidate to buy the 34% stake in Areva NP that Siemens gave up recently.
- Total (NYSE:TOT): One of the biggest oil companies in the world. The company has just signed a $5bn contract in Iran last week and is expected to sign future contracts in Iraq. The company is also entering the nuclear energy business as it announced last year it would develop a nuclear plant in the United Arabs Emirates along with Areva and GDF-Suez. Additionally, Total has 1% stake in Areva.
- Bouygues (OTC:BOUYY): A domestic industrial group. The company is best known for the building of the Stade de France, the Pont de Normandie or the Grande Arche at La Defense. Bouygues just bought 21% of Alstom from the French government.
- Electricite de France (OTC:ECIFF): One of the biggest global players in the electricity industry worldwide. The company agreed recently to buy US based Constellation Energy to grow its market share in the North American region.
- Suez-Gas De France: GDF and Suez merged in 2008 to form one of the biggest global players in the gas industry (GDF) as well as the renewable energy industry (Suez).
Today some of these stocks have tumbled to very attractive levels if you are a long term investor. EDF is back to its 2004 IPO entry price, Total is trading at 37€ far from its high of 63€ of 2007 and Areva is down more than 60% from its 2008 high. Don’t be fooled by the market and if you want to benefit from once in a lifetime opportunities, France offers many of them right now.
Disclosure: Emerginvest is an international finance portal, providing analysis and data on 120+ world markets to help individuals find investments from around the world. The author, Olivier Levant, does not hold positions in the equities listed in this article.