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Sanofi: A European Stock That Offers A Prescription For Profit

Jun. 28, 2012 1:00 PM ETSanofi (SNY)AZN, DEO, NSRGY, SAP, UN2 Comments
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As a value investor I often hunt for value in the strangest places. Super Bowl champions may head to Disney World, but I much prefer the European Union and the euro zone at the moment. Financial calamity and market panic always draw me in for a closer look.

The EU and the entire construct of the euro currency are being challenged. I wouldn't touch a European bank stock or a European government bond with a 10-foot pole. I also avoid many European companies that have significant funding risks or are exposed to credit risk with suspect European counterparties. However, Europe is home to many of the world's great companies - ones that export their products and services around the globe. As exporters, they are also beneficiaries of a declining euro exchange rate relative to countries outside the euro zone.

As a consumer, you're familiar with many Europe-based companies: AstraZenica (AZN), Diageo (DEO), Nestlé (OTCPK:NSRGY), SAP (SAP), Unilever (UN). What you may not appreciate is that each sells a material percentage of its products or services outside of the EU. These are truly global companies. In addition, they possess wide competitive "moats," generate high returns on equity and invested capital, and have balance sheets that will allow them to survive the current crisis even if the euro and the EU do not.

The key additional questions that I ask are about their future prospects, whether management is shareholder-friendly, and whether the shares are trading at a sufficient discount to my estimate of their value to make them attractive. The stocks mentioned above did not meet all of my criteria - at least not yet. But one stock not mentioned did manage to make the cut. I own Sanofi S.A. (NASDAQ:SNY) in the GreensKeeper Value Fund.

Sanofi, headquartered in Paris, is one of the

This article was written by

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Michael McCloskey has over 26 years of experience in the securities industry. After completing his formal education (B.Sc., J.D./M.B.A.) he started his career as a lawyer at Aird & Berlis LLP and became a partner four-years after joining the firm. His legal career focused on the areas of Corporate Finance and Mergers and Acquisitions. In 2002 Michael decided to leave the practice of law to join Sprott Securities (now Cormark Securities) as an investment banker and partner of the firm. He left the firm in late 2010 in order to establish GreensKeeper Asset Management.

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