2014 World Cup Investing By Country: Europe

by: Chris Katje


Coca-Cola HBC is second largest bottler of Coca-Cola branded beverages in the world.

Puma and Adidas both well represented at 2014 World Cup by players and countries.

National Bank of Greece and Santander are two banks that were hit hard by the European financial crisis.

The 2014 World Cup kicks off in Brazil on Thursday June 12th. A total of 32 teams will compete to win the quadrennial tournament. While Brazil could be the biggest country to prosper, with millions traveling to the region to watch games featuring their favorite countries, there are companies that could also benefit from a strong tournament.

Aside from the companies that will benefit directly from the tournament, I thought it would be fun to look at companies headquartered or with a large presence in each of the countries. My goal of selecting one stock and ETF for every country is to introduce some unknown companies to investors and also show off some forgotten ideas.

This article, in a series of regional World Cup articles, takes a look at Europe. Several countries in Europe have seen the results of the debt and financial crisis on stocks and the overall market. This does create opportunities for picking stocks, but also leads investors to other unloved names that serve in industries less impacted by financial woes.

The picks are listed in several articles, broken down by geographic region. Ideas for stocks were not found for Honduras, Iran, or Algeria. Information was obtained from ETF Database and the World Bank for many of the picks.


Group H

Stock Pick: Etablissements Delhaize Fr (DEG)

Etablissements Delhaize may sound unfamiliar to many Americans, but those in the south and mid-Atlantic states probably recognize the company's Food Lion supermarket brand. In fact, this retailer has over 1400 stores in 10 of the states in the southern region. Etablissements has a presence in the United States (1481), Belgium and Luxembourg (856), Greece (290), Romania (302), Serbia (381), Bulgaria (54), Bosnia (39), and Indonesia (117).

In 2013, the supermarket chain got 61% of its revenue from its United States operations. Belgium represented 24% of revenue, while the other European countries represented 15% of total revenue. There are some exciting prospects for investors, as the company is divesting its operations in Bosnia and Bulgaria and also selling off unused real estate in several areas.

In the first quarter, total revenue grew by almost 3%. Operations in the United States were strong, with same store sales increasing 4.6%. Sales in Belgium fell 0.8% in the quarter. The other European regions saw sales increase 3.5%. Etablissements plans on opening 180 stores in the fiscal year. The company is also focusing on expanding produce and fresh items into many stores, which will continue to drive same store sales growth.

Shares of Etablissements yield over 2% and trade at close to 12 times expected earnings per share of $1.46. Revenue is seen rising 4% in the current fiscal year.

ETF Pick: iShares MSCI Belgium (NYSEARCA:EWK)

Investing in Belgium centers on one of the largest beverage companies in the world, Anheuser-Busch InBev (NYSE:BUD). The $180 billion beer giant makes up 24% of assets for this fund, which has been around since 1996.

Shares of the ETF trade near 52-week highs. The fund holds a total of 44 stocks. My above stock recommendation, retailer Delhaize, is the seventh largest position with 4% of the fund's assets. Consumer makes up 31% of assets. Financials (22%), industrial (11%), and health care (10%) make up the other large percentages.

Bosnia and Herzegovina, Croatia

Group F, Group A

Stock Pick: Coca-Cola HBC (CCH)

Coca-Cola HBC is the second largest bottler of Coca-Cola in the world. The company sells Coke products in 28 countries, including Bosnia and Herzegovina, representing 585 million people. Other countries where the company has a presence are: Italy, Greece, Austria, Ireland, Switzerland, Cyprus, Poland, Hungary, Czech Republic, Croatia, Lithuania, Latvia, Estonia, Slovakia, Slovenia, Russia, Romania, Nigeria, Ukraine, Bulgaria, Serbia, Montenegro, Belarus, Armenia, and Moldova.

In fiscal 2013, Coca-Cola HBC gained or maintained volume and market share in 20 of their 24 measured markets. In 15 of the countries, the company saw all time high market share. In the recent first quarter, Coca Cola HBC saw continued share gains, although revenue and volume declined. Juice, water, and energy drinks were among the bright spots for the company. Sparkling beverages saw sales declines of 6%, but Coca-Cola Zero saw volume increase 9%.

Shares of Coca-Cola HBC are down 13% in the last year and down 20% in the last 52 weeks. The company is expecting a 1.3% decline in revenue for the full year at $9.0 billion. Next fiscal year, Coca Cola HBC is estimated to have revenue of $9.3 billion, a gain of 2.7%.

ETF Pick: None


Group D

Stock Pick: Diageo (NYSE:DEO)

What goes better with watching soccer matches than drinking beer and liquor? Possibly investing in steady grower Diageo, a world leader in spirits. With a presence in 180 countries worldwide, chances are that fans of the 32 teams in the World Cup will be drinking Diageo products as they take in the matches.

The company isn't a sexy growth stock, but continues to invest heavily in new markets and new product offerings. Despite this, the company has huge brands that will provide steady returns for investors. Recognizable names include: Johnnie Walker, Crown Royal, J&B, Captain Morgan, Guinness, Smirnoff, Bailey's, Red Stripe, and Harp.

ETF Pick: iShares MSCI United Kingdom (NYSEARCA:EWU)

There are 455 ETFs with exposure to the United Kingdom and 5 that have 95% or more of assets devoted to the region. However, it's hard to pick against this fund that has been around since 1996 and has over $4 billion in assets.

Taking a look at the top ten holdings reveals names like HSBC, BP, Shell, GlaxoSmithKline, British American Tobacco, AstraZeneca, Vodafone, Diageo, and Rio Tinto. The fund has 113 holdings, with financials and energy making up the two largest sectors, two areas that generally pay nice healthy dividends.


Group E

Stock Pick: Kering (OTCPK:PPRUF)

Kering is a large luxury goods conglomerate, owning brands like Gucci and Puma. The company has a market capitalization of $27.1 billion. In the recent first quarter, total revenue increased 4%. In fiscal 2013, Puma had sales of $3 billion, trailing only Gucci ($3.6 billion).

Kering's 84% ownership of Puma is what puts the company on this list. Puma is turning around its business and recently scored big in the NFL market by signing the number one overall pick Jadeveon Clowney to an endorsement contract.

At the World Cup, Puma will outfit eight teams, trailing only Nike (10) and Adidas (9). The teams outfitted by Puma are Italy, Switzerland, Ivory Coast, Algeria, Cameroon, Ghana, Uruguay, and Chile. Puma also has three of the largest soccer shoe deals with Mario Balotelli, Cesc Fabrgas, and Sergio Aguerao. A strong showing by any of these players or teams could significantly boost Puma sales. In fiscal 2013, Puma made up 31% of revenue, but only 11% of operating income. The brand is in recovery mode and the 2014 World Cup could boost shares of Kering in the process.

ETF Pick: iShares France (NYSEARCA:EWQ)

This ETF, created in 1996, holds 75 of the top French stocks available. Top ten companies include familiar names like Total, Sanofi, BNP Paribas, LVMH, L'Oreal, and Danone. Consumer products make up 23% of assets, while industrials (16%) and financials (13%) make up large percentages as well. The company has a low expense ratio of 0.5% and is the only ETF with over 90% devoted to France.


Group G

Stock Pick: Adidas (OTCQX:ADDYY)

Adidas will play an important role at the 2014 World Cup, as the outfitter of nine countries and also the official ball provider. Since 1970, Adidas has had a partnership with FIFA and that will continue into the future.

Adidas is outfitting Germany, Spain, Colombia, Bosnia and Herzegovina, Argentina, Japan, Russia, Mexico, and Nigeria. Next to Brazil (Nike), Adidas owns the next three highest odds on winners of the entire tournament (Argentina, Spain, Germany). Adidas is also a sponsor of Lionel Messi, who it has invested a lot of time and money into.

Adidas launched a new line of shoes under the Messi brand. Aside from Messi, Adidas also has three of the other top ten highest soccer shoe endorsees. Adidas has seen large gains in Latin America and a strong performance by Argentina, Mexico, and Colombia could increase sales further.

Adidas has a 12% share of the global sports market, behind market leader Nike (19%). In the soccer market, Adidas actually has higher sales than Nike, with $2.4 billion vs. $1.9 billion. I believe the World Cup could be a huge catalyst for Adidas and strong performance by several teams could see analysts upgrading this unloved brand.

ETF Pick: iShares MSCI Germany (NYSEARCA:EWG)

There are several ETFs with large exposure to Germany, including a couple of small cap funds that could outperform going forward. This steady ETF, created in 1996, has $6.1 billion in assets and holds 58 of the largest German companies.

The top ten make up 58% of assets for the fund. Consumer products make up 19%, while financials (15%), materials (15%), and health (13%) are also large represented sectors of the fund. Bayer and Siemens make up the largest holdings with 9% and 8% of assets, respectively.


Group C

Stock Pick: National Bank of Greece (NBG)

Here I am taking a flyer on National Bank of Greece, one of the worst performing stocks of the last two years. Fears of default and dilution by the large Greek bank have sent shares tumbling. Over the last 2 years, shares are down 66%. Shares are down 87% since their two-year high of $32.20 in October 2012.

Despite the risks, the bank still has over 500 branches and 1400 ATMs in Greece. With a market capitalization of $10 billion, this stock has room to run and represents a high risk, high reward opportunity. The company's exposure to Turkey, the United Kingdom, Cyprus, Malta, Egypt, and South Africa could also help boost the company's prospects.


The only large Greek ETF has only 24 holdings. The diversification isn't great with this fund either, as financials equal 36% of total assets. In fact, National Bank of Greece is the second largest holding and the first holding is also a bank. The risks here are pretty high. Consumer products (30%) and communications (10%) also represent large asset stakes. This isn't my favorite ETF, but the only big way to play Greece.


Group D

Stock Pick: Luxottica (NYSE:LUX)

This is a great pick for exposure to Italy, parts of Europe, and also growing emerging markets. Investors also get access to leading retail brands like LensCrafters, Pearle Vision, Sears Optical, and Sunglass Hut. Luxottica operates as a retailer and also a wholesaler, with brands like Ray Ban, Oakley, and Prada licensed glasses.

Luxottica has a market capitalization of $27 billion and sees shares trading at close to their 52-week high. The shares also trade with high valuations on price to sales and price to earnings multiples. However, there are several big things coming for the company that I believe will move shares higher.

In the most recent first quarter, Luxottica saw sales in Europe rise 9% and emerging markets rise 10%. Areas like China, which saw double digit same store sales growth and additional store openings, and Brazil, with strong Sunglass Hut sales, saw huge growth.

To go along with emerging market growth, Luxottica has exciting new areas that could give sales a boost. Luxottica is integrating a 3-D try-on technology with its Glasses.com platform, which could increase glass sales through the site. Luxottica also recently signed a 10-year exclusive deal with Michael Kors for glasses. The biggest variable could be Luxottica's partnership with Google Glass, which could pay off down the road as more details come to the forefront.

ETF Pick: iShares MSCI Italy Capped (NYSEARCA:EWI)

Investors have over 100 ETFs to choose from with exposure to Italy. However, only one offers more than 90% of assets devoted to the region. This ETF, which has been around since 1996, has assets of $1.6 billion and a low expense ratio of 0.5%.

iShares Italy has 27 holdings, with Eni representing the largest weighting of 17%. Luxottica is the 10th highest position with 4% of assets. Financials (35%) and energy (22%) make up the largest weightings.


Group B

Stock Pick: Koninlijke Phillips (NYSE:PHG)

Phillips is a huge business with a focus on consumer products, lighting, and healthcare. Chances are you've encountered its products at home or work. Recent weakness in the company and several of its businesses could be in the process of turning around.

In the first quarter, sales were flat for Phillips due to declines in healthcare and flat sales in lighting. Consumer lifestyle saw sales up 7% in the first quarter. Despite the decline in total healthcare sales, home healthcare sales improved. Despite a decline in lighting, LED sales were up 37% and make up 33% of the lighting division. The shift to high powered LED lights continues to be a transition for Phillips and could power growth in the future.

Phillips continues to grow internationally past its key North American and European markets. In the first quarter, the company saw double digit sales increases in the Middle East and Turkey. China also had high single digit sales increases in the first quarter. The company has a turnaround program called Accelerate!, which will go from 2014-2016. This program is set to unlock the full potential faster for Phillips. Shares of Phillips are now down 12% in 2014 and trade in the middle of their 52-week range. Shares also yield a healthy 3% dividend.

ETF Pick: iShares Netherlands (NYSEARCA:EWN)

iShares Netherlands has been around since 1996 and has only $236 million in assets. This is pretty low compared to other iShares key country funds that were some of the firsts on the market. This ETF has pretty good diversification with 54 holdings, but is heavily weighted in the top 10.

Consumer giant Unilever, which sells brands like Dove, Axe, and Lipton, is the largest holding with 18% of the funds. The ETF is heavily weighted in consumer (36%), financial (19%) and technology (17%). This is a great ETF for exposure to international consumer brands and also growth in Netherlands.


Group G

Stock Pick: Portugal Telecom (NYSE:PT)

Shares of Portugal Telecom have fallen 54% in the last five years. Portugal has been hit with declining GDP and debt problems. Portugal Telecom, the largest communications company in the country, has shared problems along the way.

The company recently merged with Oi, a mobile company in Brazil. The combined companies have over 100 million subscribers and can drive growth going forward. Oi is even launching a prepaid WiFi service for tourists in Brazil at the 2014 World Cup. Oi has the largest Wi-Fi service in Brazil. The World Cup could provide a boom for the new combined company. Portugal Telecom is also investing in television and cloud services for further growth.

ETF Pick: FTSE Portugal 20 (NYSEARCA:PGAL)

This Global X ETF is the only dedicated Portugal fund. The company has only 23 stocks and 28% of its assets are devoted to Energias de Portugal, a utility company in the country. With this large holding, utilities make up 34% of assets. Other large holdings are in the financial (16%), energy (13%), and materials (11%) sectors. As you can see, the fund is invested heavily in energy and utility companies, which give the fund good exposure to hard assets. Portugal isn't a great territory to be in, but if you have to, this fund is the way.


Group G

Stock Pick: Mobile TeleSystems (NYSE:MBT)

Investing in Russia or the Ukraine right now is becoming a nightmare due to the political tensions between the regions. Russian oil and mining companies have been hit hard over sanctions, which pushed me away from those sectors. My pick is Mobile TeleSystems, which is a leading phone company in Russia, Ukraine, Armenia, and Turkmenistan.

Shares of this telecom trade in the mid-range of their 52-week price range. Shares also yield 1.5% in dividends. The company is now down 8% in 2014, after gaining over 15% in 2013.

In the fourth quarter, revenue increased 5%, led by strong mobile growth of 7%. The company is expanding its LTE network. Mobile TeleSystems is seeing lower revenue per subscriber, but gaining in volume numbers. A recent 11% investment in OZON Holdings, the leading e-commerce company in Russia, may lead to new markets and potential gains.

ETF Pick: Market Vectors Russia Small Cap

Investing in Russia large cap companies comes with increased risks, as their exporting businesses are seeing pressure from sanctions. I would avoid Russia right now, but if needed would invest in smaller companies that see money made in their own country. This small cap fund has 37 holdings, and has its largest percentage devoted to real estate (15%). Other large weights are also materials, industrials, and utilities.


Group B

Stock Pick: Banco Santander (NYSE:SAN)

Looking for a way to invest in Spain, look no further than Banco Santander, one of the largest banks in all of Europe. The company has a strong presence in Spain, but is also present in 24 other countries. The company's strong presence in its 10 main markets has also led to the spinning off of several businesses.

Santander has spun off its Brazil (NYSE:BSBR), Mexico (NYSE:BSMX), Chile (NYSE:BSAC) and USA (NYSE:SC) into publicly traded companies. I highlighted the Brazil, Mexico, and Chile stocks in an article recently. As of 12/31/13, Santander had 6160 branches in Central Europe and 5904 in Latin America. The company has one of the strongest international presences of major banks.

Shares of Santander are picking up after falling from the European debt worries. Shares hit a 52-week high on Friday. Year-to-date, shares are up 22%. However, Santander still trades 6% lower in the past 5 years and has more room to run with several key areas seeing strong improvements.

ETF Pick: iShares MSCI Spain Capped (NYSEARCA:EWP)

This ETF has been around since 1996 and has over $2 billion in assets. Santander, mentioned above, represents 22% of the ETF. In total, the financial holdings of the ETF make up 48% of the fund. The iShares fund has only 25 holdings, but also has key assets in the telecommunications, textiles, and oil segments.


Group E

Stock Pick: Nestle (OTCPK:NSRGY)

Nestle is one of the largest companies in all of Europe, with a market capitalization of $247 billion. The consumer giant sells products in categories like baking, chocolate/snacks, coffee, drinks, ice cream, culinary/frozen, and international products.

Recently, Nestle sold an 8% stake it had in beauty company L'Oreal. Nestle remains committed for the long haul and still has a 23% stake in the company. However, this deal freed up cash for the company that could go towards acquisitions, share buybacks, or dividends. Nestle pays an annual dividend, which has been rising and was over 3% in 2013.

Aside from food, Nestle is also venturing further into skin care. The company's skin care unit has a Botox competitor in Azzalure. Other skin care products will be coming soon from this unit and could provide instant growth for the company.

In 2014, shares are up only 6%, despite decent estimated growth of 5% and a 3% dividend yield. This consumer giant is a great way to invest not only in Switzerland, but also the growing population of the world.

ETF Pick: iShares Switzerland (NYSEARCA:EWL)

Nestle is my favorite pick for Switzerland and also the top holding in my ETF pick. This iShares fund, which was created in 1996, has 18% of its assets devoted to Nestle. The fund also has large stakes in Roche (14%) and Novartis (14%). The largest weights are healthcare (31%), consumer (26%), and financials (18%).

Disclosure: The author has no positions in any stocks mentioned, and no plans to initiate any positions within the next 72 hours. The author wrote this article themselves, and it expresses their own opinions. The author is not receiving compensation for it (other than from Seeking Alpha). The author has no business relationship with any company whose stock is mentioned in this article.

Editor's Note: This article discusses one or more securities that do not trade on a major U.S. exchange. Please be aware of the risks associated with these stocks.