As a strategic global investor and trader, I am constantly looking for investment opportunities that other market participants are simply not paying attention to. With such a "news-driven market" that we have today, it seems as though all investors care about is the next story out of Europe. Since it is pretty safe to say that Europe's economic conditions will fail to grow better anytime soon, I will look for opportunities that should profit no matter the news coming out of Europe. In other words, I am looking for an investment opportunity that should benefit as long as no major changes occur in Europe.
European stocks altogether have been beaten up as European woes continue to be the center of the global investor's attention, indicated by the huge underperformance of the EuroStoxx 50 (FEZ) compared to U.S. Equities (SPY). There are however some bright spots and sectors that are offering opportunity in the recent carnage. One of these areas is European-based export companies. In other words, European companies that do a great deal of business outside of Europe, thus limiting exposure to Europe's complications. Should current conditions in Europe fail to change, no matter how much worse Europe's situation becomes, these European-based export companies should outperform their European-focused counterparts (European companies that focus their business in Europe).
3 European Export Companies Offering Value
Siemens (SI) - The German based multinational conglomerate is offering opportunity versus its peers given its large business outside of Europe. It is currently trading with a low P/E of 14.5x, and a 1 Year forward P/E of 9.4x. Siemens also offers a dividend yield of 3.4%.
Adidas (OTCQX:ADDYY) - Another German based company, specializing in sports apparel and accessories does a large portion of its business outside of Europe. It is currently trading with a low P/E of 16.4x, and a 1 Year forward P/E of 12.9x.
Sanofi-Aventis (SNY) - Sanofi is a French multinational pharmaceutical company that also does large business outside of Europe and perhaps offers the best opportunity from a valuation and dividend perspective. It is currently trading with a low P/E of 12.9x, and a 1 Year forward P/E of 9.7x. Sanofi also offers a dividend yield of 4.4%.
Below is a performance chart of Siemens (blue), Adidas (red), Sanofi (green), and the EuroStoxx 50 (black). You'll notice quickly how the three stocks listed above have outperformed the European benchmark quite nicely since Q4 2009.
(Chart courtesy of stockcharts.com)
The second chart below shows the same three companies, however, this time priced against the EuroStoxx 50. The black line is once again the EuroStoxx 50 by itself.
This chart shows the significant outperformance of these three European export companies versus their European benchmark. As the index finishes negative during this timeframe, the other three spreads perform extremely well.
Purchasing European-based export companies, such as the three listed above, are offering great potential as European stocks altogether continue to be sold off. No matter how much the European situation deteriorates, it is likely that these companies will outperform as they have less exposure to Europe's complications compared to most other European-based companies. The best way, in my opinion, to express this market theme/view, would be to purchase these three companies and sell short an equal amount of EuroStoxx 50. This would take out directional risk, and just profit off of the outperformance of the three European-based export companies.