Dan Caplinger of the Motley Fool looks at European stocks and how to pick out stocks that can deal with the current uncertainties that are rife across the eurozone. Investors willing to manage some risk, could be looking for bargain European stocks.
There are three elements to his filter:
- Strong cash/debt position so there is strength to deal with the unexpected
- Significant business outside of Europe
- Trade on the U.S. Exchanges
Based on this, he found the following five stocks.
Stock | Cash/Debt | Revenue Outside Europe |
|---|---|---|
| Aixtron (AIXG) | $426 million / $0 | 95% |
| Icon (ICLR) | $166 million / $0 | 53% |
| Logitech (LOGI) | $379 million / $0 | 64% |
| Sequans Communications (SQNS) | $65.5 million / $3.4 million | 93% |
| Vistaprint (VPRT) | $161 million / $0 | 52%* |
Source: S&P Capital IQ as of Dec. 12. *U.S. revenue; Vistaprint doesn't break down non-U.S. revenue between European and non-European countries.
- Aixtron produces semiconductor equipment
- Icon is in the biotech market
- Logitech is more of a household name with computer peripherals
- Sequans is a wireless IC design house
- Vistaprint delivers business cards and brochures
I have not verified all of the data listed above and some of the companies are relatively small, which gives me some concern. Despite this, it will be interesting to compare this with our benchmark ETF portfolio.
| Asset | Fund in this portfolio |
|---|---|
| REAL ESTATE | ICF (iShares Cohen & Steers Realty Majors) |
| CASH | CASH |
| FIXED INCOME | TIP (iShares Barclays TIPS Bond) |
| Emerging Market | VWO (Vanguard Emerging Markets Stock ETF) |
| US EQUITY | DVY (iShares Dow Jones Select Dividend Index) |
| US EQUITY | VIG (Vanguard Dividend Appreciation ETF) |
| INTERNATIONAL EQUITY | IDV (iShares Dow Jones Intl Select Div Idx) |
| High Yield Bond | HYG (iShares iBoxx $ High Yield Corporate Bd) |
| INTERNATIONAL BONDS | EMB (iShares JPMorgan USD Emerg Markets Bond) |
- Five Eurostocks That Can Survive Eurogeddon -- Total of $10K invested equally in each stock
- Retirement Income ETFs Tactical Asset Allocation Moderate -- Above funds using TAA (40% fixed income, 30% for each of the top two asset classes)
- Retirement Income ETFs Strategic Asset Allocation Moderate -- Above funds using SAA (40% fixed income, 12% for each of the five asset classes -- funds selected based on price momentum)
Portfolio Performance Comparison
| Portfolio/Fund Name | 1Yr AR | 1Yr Sharpe | 3Yr AR | 3Yr Sharpe | 5Yr AR | 5Yr Sharpe |
|---|---|---|---|---|---|---|
| Retirement Income ETFs Tactical Asset Allocation Moderate | 1% | 5% | 9% | 70% | 8% | 57% |
| Retirement Income ETFs Strategic Asset Allocation Moderate | -1% | -4% | 13% | 80% | 2% | 6% |
| Five Eurostocks That Can Survive Eurogeddon |
This chart tells us nothing because SQNS started trading this year. If you are bold enough to take this contrarian view, perhaps this encourages you because they were able to go public in a tough market.
Three-Month Chart One Year Chart
Three Year Chart
Five Year Chart
The graphs tell me all that I want to know. While many would say that having a diversified portfolio is a good idea, and it is; I would want to see more history and less of a downward drop before I move to take this on. The companies may have the strength to last through the current and future turbulence but whether their stock values will compare with some large cap, dividend earning U.S. companies is another matter. This one is not for me.
Disclosure: MyPlanIQ does not have any business relationship with the company or companies mentioned in this article. It does not set up their retirement plans. The performance data of portfolios mentioned above are obtained through historical simulation and are hypothetical.
