{"id":23791,"date":"2011-09-13T07:40:48","date_gmt":"2011-09-13T11:40:48","guid":{"rendered":"http:\/\/countingpips.com\/fx\/?p=23791"},"modified":"2011-09-13T07:40:48","modified_gmt":"2011-09-13T11:40:48","slug":"its-time-to-go-dumpster-diving-again-in-europe","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2011\/09\/13\/its-time-to-go-dumpster-diving-again-in-europe\/","title":{"rendered":"It\u2019s Time to Go Dumpster Diving (Again) in Europe"},"content":{"rendered":"

By WallStreetDaily.com<\/a><\/strong><\/p>\n

\n

In the summer of 2010, the contrarian in me was salivating over the opportunity in Europe.<\/p>\n

Then, much like now, the eurozone was in an awful tailspin<\/a>. The culprit? Fears over a sovereign debt contagion.<\/p>\n

Go figure, but that\u2019s exactly what\u2019s weighing on the markets again. As MarketWatch reports, \u201cEuropean stock markets fell sharply on Monday on increased fears that Greece is headed for a default.\u201d<\/p>\n

So much for time healing all wounds! Despite multiple rounds of bailouts, we\u2019re literally right back where we were a little over a year ago.<\/p>\n

Instead of begrudging the lack of progress, though, we need to embrace the opportunity. Because many blue-chip European companies with rock-solid fundamentals are getting unfairly punished.<\/p>\n

And there\u2019s one in particular that represents an opportunity too good to pass up\u2026<\/p>\n

Dialing Up Double-Digit Gains and Yields in Spain<\/strong><\/p>\n

My favorite beaten-down European stock right now is Telefonica (NYSE: TEF<\/a>), the biggest telephone company in Spain.<\/p>\n

Ever since Euro Crisis 2.0 hit, the stock\u2019s off about 34%. And that\u2019s almost exactly the amount the stock fell during Euro Crisis 1.0, before snapping back 48%. Take a look:<\/p>\n

\"\"<\/a><\/p>\n

I\u2019m convinced that the stage is set for exactly the same type of rebound. And if you\u2019re not interested in earning a potential 48% profit \u2013 in a short period of time \u2013 you need to get your pulse checked.<\/p>\n

A Rare Recession (and Euro Crisis) Resistant Dividend Stock<\/strong><\/p>\n

In addition to being Spain\u2019s dominant phone company, Telefonica is also the largest wireless provider in Britain. It\u2019s a major player in Latin America, too, particularly in Brazil.<\/p>\n

And no matter what\u2019s going on in the world or currency markets, people aren\u2019t going to suddenly give up their telephones, mobile phones, or broadband internet connections.<\/p>\n

They didn\u2019t in the throes of the 2008 global downturn. They didn\u2019t last summer. And they won\u2019t do it this go-round, either.<\/p>\n

At worst, the company might suffer a 1% to 3% drop in sales. But that\u2019s hardly enough to justify the current selloff in shares.<\/p>\n

If you need more tangible proof, take a look at Telefonica\u2019s track record.<\/p>\n

The company has increased its sales by an average of about 12% per year, since 2002. Pulling off such a feat doesn\u2019t happen unless you operate a business with steady, undeterred and growing demand.<\/p>\n

But demand aside, the real reason the latest euro crisis won\u2019t torpedo Telefonica\u2019s business is simply because the majority of the company\u2019s sales \u2013 around 60% \u2013 don\u2019t even come from the eurozone. They come from Latin American markets, which boast some of the strongest growth potential in the world.<\/p>\n

So if anything, Telefonica is actually shielded from the collapsing value of the euro. (Remember, a weaker euro leads to a fatter bottom line, as the company enjoys gains on overseas profits, thanks to currency translation.)<\/p>\n

Clueless investors are, of course<\/a>, overlooking this reality. But let\u2019s not be so myopic or foolish.<\/p>\n

In the end, Telefonica represents one of the bluest-of-blue-chip stocks<\/a> in the market. It operates a simple business with ever-steady demand. And it spins off gobs of cash \u2013 almost $17 billion in the last 12 months \u2013 which management kindly returns to shareholders via dividends.<\/p>\n

Mind you, after the latest selloff, Telefonica now sports a safe and attractive 9.5% yield.<\/p>\n

The fact that the stock\u2019s trading on the super cheap, too, only makes the opportunity more irresistible.<\/p>\n

At current prices, Telefonica trades at a price-to-earnings (P\/E) ratio of just 6.22, which is about 50% cheaper than the average stock in the S&P 500 and well below the company\u2019s five-year average P\/E ratio of 11.5.<\/p>\n

Bottom line: The thought of buying any European stock right now might be downright repulsive. But the 34% selloff in shares of Telefonica since Euro Crisis 2.0 began is flat out unjustified. So hold your nose and don\u2019t let this rare opportunity for double-digit gains (and yields) pass you by.<\/p>\n

Ahead of the tape,<\/p>\n

Louis Basenese<\/p>\n

It\u2019s Time to Go Dumpster Diving (Again) in Europe<\/a><\/p>\n<\/div>\n","protected":false},"excerpt":{"rendered":"

The thought of buying any European stock right now might be downright repulsive. But the 34% selloff in shares of Telefonica since Euro Crisis 2.0 began is flat out unjustified. So hold your nose and don\u2019t let this rare opportunity for double-digit gains (and yields) pass you by.<\/p>\n","protected":false},"author":1,"featured_media":0,"comment_status":"closed","ping_status":"closed","sticky":false,"template":"","format":"standard","meta":{"footnotes":""},"categories":[],"tags":[],"class_list":["post-23791","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/23791","targetHints":{"allow":["GET"]}}],"collection":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts"}],"about":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/types\/post"}],"author":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/users\/1"}],"replies":[{"embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/comments?post=23791"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/23791\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=23791"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=23791"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=23791"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}