{"id":40403,"date":"2013-07-29T12:24:57","date_gmt":"2013-07-29T16:24:57","guid":{"rendered":"http:\/\/countingpips.com\/forex-news\/?p=40403"},"modified":"2013-07-29T12:24:57","modified_gmt":"2013-07-29T16:24:57","slug":"three-stocks-for-a-recovering-europe","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/forex-news\/2013\/07\/29\/three-stocks-for-a-recovering-europe\/","title":{"rendered":"Three Stocks for a Recovering Europe"},"content":{"rendered":"

By The Sizemore Letter<\/u><\/a> <\/p>\n

It\u2019s getting harder to find bargains in the stock market these days.\u00a0 American stocks aren\u2019t expensive<\/i>, per se, but they\u2019re not exactly a bargain either.<\/p>\n

The S&P 500 trades for 17 times earnings, which is slightly above the long-term average.\u00a0 If you\u2019re aggressively buying U.S. stocks at these levels, you\u2019re either expecting earnings growth to pick up speed in the coming quarters\u2026or you\u2019re looking to sell to a greater fool.<\/p>\n

Yet across the Pond, there are some noteworthy values to be found.\u00a0 Five years of on-again \/ off-again crisis have turned investors away from Old Europe and have created some real bargains for those of us willing to look.<\/p>\n

I\u2019ll start with Norwegian oil and gas giant Statoil ($<\/span>STO<\/a>).<\/b>\u00a0 I\u2019ve had my eyes on Statoil for years\u2014and recommended it in the March 2013 issue of the Sizemore Investment Letter<\/i><\/a><\/strong>\u2014because of its unique strategic position.<\/p>\n

You see, Statoil is the second-largest natural gas producer in Europe after Russia\u2019s Gazprom.\u00a0 Russia\u2019s tendency to use its gas supplies as a geopolitical weapon has incentivized Europe to look elsewhere, and Statoil has been a major beneficiary.\u00a0 Add to this Europe\u2019s commitment to use less carbon-intensive energy sources as part of its environmental commitments, and you have the makings of an excellent macro backdrop.<\/p>\n

Statoil is cheap to the point of being hard to believe.\u00a0 It trades for 8 times forward earnings and 0.65 times sales.\u00a0 With Europe in and out of recession, Wall Street just can\u2019t get comfortable with owning a European energy stock.<\/p>\n

Their loss.\u00a0 Statoil pays 4% in dividends and has a long record of raising its dividend every year.\u00a0 We can buy it and milk the dividend indefinitely while we\u2019re waiting for its value to be realized.<\/p>\n

Next on the list is Daimler ($<\/span>DDAIF<\/a>), <\/b>my recommendation in InvestorPlace\u2019s 10 Stocks for 2013<\/a> <\/strong>contest.\u00a0 As this is going to press, Daimler was sitting pretty in first place with a 10-point lead over Mylan ($<\/span>MYL<\/a>)<\/b> in the second spot.<\/p>\n

Yet despite Daimler strong performance this year, the stock is still shockingly cheap.\u00a0 Daimler\u2014the premier global luxury automaker\u2014trades for just 8 times earnings.\u00a0 That represents a 45% discount to the broader German market, by Bloomberg estimates<\/a>.<\/p>\n

Daimler also trades for just 0.49 times sales and sports a 4% dividend\u2026and nearly a third of its market cap is in cash.\u00a0 Investors have been unwilling to pay up for the stock due to Europe\u2019s economic malaise and due to fears of a hard Chinese landing.\u00a0 Yet Daimler shares my view<\/a> that the worst is already behind us in Europe and that the continent is (at least slowly) making a recovery.<\/p>\n

Even after its recent run-up, Daimler is still a buy.<\/p>\n

Finally, no list of European blue chips would be complete without beer giant Heineken ($<\/span>HEINY<\/a>)<\/b>.<\/p>\n

Beer sales are actually pretty weak in Europe, and it\u2019s not just due to the economy.\u00a0 It\u2019s demographics.\u00a0 Heineken\u2019s core beer-guzzling Baby Boomer clientele is drinking less as it ages, and it\u2019s not being replaced by younger Europeans.\u00a0 Like their American counterparts, younger Europeans tend to prefer vodka-based cocktails.<\/p>\n

Let me let you in on a little secret: I don\u2019t care.<\/p>\n

Not in the slightest.\u00a0 So long as Heineken\u2019s European sales more or less stay steady and avoid rapid shrinkage, Heineken is still an excellent long-term growth stock for its presence in emerging markets and particularly Africa.<\/p>\n

Africa is the last real frontier market, and Heineken already gets about a quarter of its profits from the continent.\u00a0 As African living standards and incomes continue to rise, Heineken is in a unique position to benefit.<\/p>\n

I consider Heineken one of those select few stocks that I would be comfortable buying and holding forever, or at least for the foreseeable future.\u00a0 And today, you can buy it for less than 10 times earnings and 1.5 times sales.\u00a0 As a point of reference, Anheuser-Busch InBev ($<\/span>BUD<\/a>)<\/b> trades for 20 times earnings and 3.5 times sales\u2026and the iconic maker of Bud Light and Stella Artois doesn\u2019t have anything close to Heineken\u2019s opportunities in Africa.<\/p>\n

Disclosures: Sizemore Capital is long STO, DDAIF and HEINY. \u00a0This article first appeared on InvestorPlace<\/a>.<\/p>\n

SUBSCRIBE\u00a0<\/b><\/a>to\u00a0Sizemore Insights<\/em>\u00a0via e-mail today.<\/p>\n

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