Avoiding European stocks has made sense for the past several months, but that strategy might not work going forward. Many analysts are bearish on Europe and most economists are expecting a significant recession in the eurozone for 2012. There is plenty of data and fear to support the idea that consumers are worried and less likely to spend, with so many negative headlines. While a recession is likely, there is a positive side to all the fear and that is the recent drop in the euro. Most major European companies have significant revenues coming from countries outside of the eurozone and this means that a weaker euro could be of great benefit to exporters.
The current combination of low valuations in European stocks and what is likely to be strong currency gains from a weak euro, is providing an excellent buying opportunity for long-term investors. Recessions often only last for 6 months to a year, so investors who take advantage of cheap valuations in the eurozone now are likely to be rewarded in time. Even though many Europe-based stocks are bargains now, the problems are not resolved, so it only makes sense to buy on dips. Here are a number of Europe-based companies that export around the world, with attractive stock valuations:
Novartis (NYSE:NVS) is a leading pharmaceutical company, based in Switzerland. Novartis manufactures and markets vaccines, prescription drugs, over the counter and other products. This company recently announced it would layoff almost 2,000 employees due to an expected drop in sales with its blockbuster drug for hypertension, called Diovan. This drug loses patent expiration in the United States in September, 2012. Because of this, it makes sense to wait for dips to about $52 before buying. On the plus side, Novartis is likely to benefit from a weak euro since this company exports to many countries outside of the eurozone.
Here are some key points for NVS:
- Current share price: $58.34
- The 52 week range is $51.60 to $64.82
- Earnings estimates for 2011: $5.54 per share
- Earnings estimates for 2012: $5.68 per share
- Annual dividend: about $2 per share which yields about 3.5%
Unilever NV (NYSE:UN) is based in the Netherlands, and markets some very popular food products with brand names such as Ben & Jerry's, Knorr, Hellmans, Wish-Bone, Amora, Ragu, Bertolli, Vaseline, Suave, Slim Fast, Dove, and others. This company sells its products throughout the world so if demand in Europe remains soft or gets worse, this will be offset from growth in emerging market countries. Unilever shares dropped to about $30.50 per share in October, and seems to have strong support at that level. With substantial revenues coming from overseas, Unilever is bound to see some foreign currency gains thanks to the weak Euro. However, it makes sense to wait for dips before buying this stock.
Here are some key points for UN:
- Current share price: $32.64
- The 52 week range is $28.89 to $35.17
- Earnings estimates for 2011: $2.11 per share
- Earnings estimates for 2012: $2.28 per share
- Annual dividend: about $1.04 per share which yields about 3.2%
Sanofi-Aventis (NYSE:SNY) is a leading pharmaceutical and vaccine company, based in Paris, France. This company makes a number of blockbuster drugs such as Ambien, and Plavix. Sanofi sells its products worldwide and is likely to benefit from a weaker euro. This company has a solid balance sheet and a diverse product line. Sanofi shares dropped to about $32 in late November and more recently to about $34.50. The stock looks like a great buy on dips below $35 for long-term investors.
Here are some key points for SNY:
- Current share price: $36.18
- The 52 week range is $30.98 to $40.75
- Earnings estimates for 2011: $4.56 per share
- Earnings estimates for 2012: $4.01 per share
- Annual dividend: about $1.32 per share which yields about 3.7%
Siemens AG (SI) is a major electronics, healthcare, automation and engineering company, based in Germany. This company is also involved in finance, telecommunications, real estate and other industries. This company has substantial operations and revenues coming from countries outside of Europe, and that could help mitigate any pressures from a weak European economy. The dividend is above average and looks solid. This stock has dropped to the $90 to $93 level a few times recently, so patiently waiting for pullbacks to those levels makes sense for long-term investors.
Here are some key points for SI:
Current share price: $101.02
- The 52 week range is $84.86 to $146.74
- Earnings estimates for 2011: $9.49 per share
- Earnings estimates for 2012: $11.38 per share
- Annual dividend: about $2.95 per share which yields 3%
ABB Limited (NYSE:ABB) is a Switzerland-based manufacturer of electrical, industrial and automation products. This company sells its products globally to energy companies, utilities, railroads, airports, automotive companies and many more. With a very diverse product line and revenues coming from around the world, ABB will benefit from a weaker Euro. The yield is generous and the stock valuation is reasonable, so buying dips makes sense for long-term investors.
Here are some key points for ABB:
- Current share price: $21.40
- The 52 week range is $15.89 to $27.58
- Earnings estimates for 2011: $1.44 per share
- Earnings estimates for 2012: $1.71 per share
- Annual dividend: 67 cents per share which yields 3.3%
Eni SPA (NYSE:E) is a major integrated oil company, based in Italy with operations worldwide which include refining, exploration, and service stations. With a low price to earnings ratio and a generous dividend, Eni is one of the best values in the oil sector. Even if the eurozone remains weak, Eni can sell oil on the world market. While many oil contracts are based in U.S. dollars, Eni should still benefit from a weaker euro in certain areas. This stock has been on the rise since hitting lows of about $34 in October. Any major drop in this stock looks like an excellent buying opportunity.
Here are some key points for E:
- Current share price: $44.49
- The 52 week range is $32.44 to $53.80
- Earnings estimates for 2011: $4.88 per share
- Earnings estimates for 2012: $4.97 per share
- Annual dividend: about $2.04 per share which yields about 4.8%
Telefonica SA (NYSE:TEF) is a mobile communications services company whose services include voice, data, Internet, etc. Telefonica is based in Spain, which has very high unemployment levels and a weak economy. However, Telefonica also has operations and derives significant revenues from Latin America which is seeing much stronger economic growth. Communications and mobile phones will probably see a relatively limited impact from a long recession since many consumers consider communications to be a necessity. Any major pullbacks are opportunities to accumulate this high-yielding stock.
Here are some key points for TEF:
- Current share price: $17.49
- The 52 week range is $16.53 to $27.31
- Earnings estimates for 2011: $1.72 per share
- Earnings estimates for 2012: $2.18 per share
- Annual dividend: $1.69 per share which yields about 9.8%
Data is sourced from Yahoo Finance. No guarantees or representations are made. Hawkinvest is not a registered investment advisor and does not provide specific investment advice. The information is for informational purposes only. You should always consult a financial advisor.
Disclosure: I have no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours.