Why I’m Looking For Bargains In Europe

Europe is on the road to recovery and there are bargains to be found on the continent.

The content of this article was relevant at the time of publishing. Circumstances change continuously and caution should therefore be exercised when relying upon any content contained within this article.

When investing, your capital is at risk. The value of your investments can go down as well as up and you may get back less than you put in.

Read More

The content of this article is provided for information purposes only and is not intended to be, nor does it constitute, any form of personal advice. Investments in a currency other than sterling are exposed to currency exchange risk. Currency exchange rates are constantly changing, which may affect the value of the investment in sterling terms. You could lose money in sterling even if the stock price rises in the currency of origin. Stocks listed on overseas exchanges may be subject to additional dealing and exchange rate charges, and may have other tax implications, and may not provide the same, or any, regulatory protection as in the UK.

You’re reading a free article with opinions that may differ from The Motley Fool’s Premium Investing Services. Become a Motley Fool member today to get instant access to our top analyst recommendations, in-depth research, investing resources, and more. Learn More.

The green shoots of growth have begun to emerge within Europe over the past 12 months. For example, Spanish economic growth is gaining traction, Germany is still growing and 24 EU countries have reported a drop in unemployment over the last year.

These figures have prompted the European Central Bank to upgrade its growth forecast for the Eurozone in 2015 to 1.5%, from 1.0%.So the region appears to be turning a corner, and for this reason, I’m on the hunt for European bargains. 

Industrial sector

One of the best places to look is the European manufacturing sector. With the value of the euro falling, exporters should receive a boost as a weaker domestic currency generally stimulates exports — exactly what struggling exporters in the region need. This is one of the side effects of the ECB’s quantitative easing program.

And investors don’t have to look far to find high-quality European manufacturers. AirbusSiemensBASF and Bosch are some of Europe’s top industrial conglomerates, and they are all powering ahead as economic growth takes off.

Property plays

Outside the manufacturing sector, there are also deals to be found in Europe’s beaten-down property market. Indeed, the European property sector has seen a sharp turnaround over the past few months with asset prices jumping 5% to 20% since the end of last year. During 2014, the value of property transactions jumped by 36% across the region.

Spain in particular has attracted the most attention in the renewed euro area property boom. The Spanish property market has attracted some of the world’s best investors, including Carlos Slim and Microsoft founder Bill Gates.

Gates and Slim hold spots one and two on the list of the world’s wealthiest people so investors should watch where they’re investing closely. Both of these multi-billionaires have invested heavily in Spanish property of the past few years, snapping up builders, Spanish real-estate investment trusts and physical property.

And with property prices across the region rising, interest rates falling and economic growth gaining traction, European property looks to be a great investment.

Bargains to be found

There are plenty of bargains to be found across Europe. According to my figures, in the Eurozone’s four largest economies — Spain, Germany, France and Italy — out of 863 companies screened, 77 are trading at a forward P/E of less than 15. Ten of these companies support dividends yields of 3% or more. 

Some of the cheapest plays include banking giants BNP ParibasSantander and Societe Generale. Utility company EDF also makes the cut and so does luxury fashion designer Christian Dior. Other attractively priced plays include industrial conglomerate Siemens, automotive giant BMW and conglomerate Daimler.

These companies all have market capitalisations of more than 30bn euros so they’re hardly undiscovered gems and growth is likely to be sluggish. 

Should you invest, the value of your investment may rise or fall and your capital is at risk. Before investing, your individual circumstances should be assessed. Consider taking independent financial advice.

Rupert Hargreaves has no position in any shares mentioned. The Motley Fool UK has no position in any of the shares mentioned. We Fools don't all hold the same opinions, but we all believe that considering a diverse range of insights makes us better investors.

More on Investing Articles

Investing Articles

With their 7.2% dividend yield, are Aviva shares a bargain?

Our writer explains why the Aviva dividend outlook and its current valuation mean he sees it as a share investors…

Read more »

British Pennies on a Pound Note
Investing Articles

Up 179%, is this penny share about to break the £1 barrier?

Following strong interim results from this company in the middle of a price boom, our writer weighs whether the penny…

Read more »

Typical street lined with terraced houses and parked cars
Investing Articles

What would it take for the Tesla share price to double – or halve?

Christopher Ruane considers sentiments and hard facts when trying to unpick what could move the Tesla share price up or…

Read more »

Investing Articles

Should I pile into Greatland Gold (GGP) now the share price is just 7.25p?

The Greatland Gold (GGP) share price could take off on the back of "transformational" operational progress, but I'm hesitant.

Read more »

Bus waiting in front of the London Stock Exchange on a sunny day.
Investing Articles

How much can I really make from UK stocks?

This Fool was thrilled to discover a fascinating study on the long-term returns of UK stocks. Here's what it had…

Read more »

Investing Articles

Direct Line shares rocketed 41% yesterday! What now?

Direct Line shares have smashed through the ceiling on news of a takeover bid from another UK insurance giant. Our…

Read more »

Light trails from traffic moving down The Mound in central Edinburgh, Scotland during December
Investing Articles

What are the best value shares for me to buy in December?

Stephen Wright thinks shares in UK companies looking to streamline their operations could be attractive opportunities for value investors next…

Read more »

Young female analyst working at her desk in the office
Investing Articles

Is this FTSE 100 stock really the next Rolls-Royce?

JP Morgan analysts suggest shares in FTSE 100 aerospace manufacturer Melrose could be set for some big gains. Stephen Wright…

Read more »