{"id":27343,"date":"2012-02-13T11:04:05","date_gmt":"2012-02-13T16:04:05","guid":{"rendered":"http:\/\/countingpips.com\/fx\/2012\/02\/13\/worlds-most-contrarian-investment\/"},"modified":"2012-02-13T11:04:05","modified_gmt":"2012-02-13T16:04:05","slug":"worlds-most-contrarian-investment","status":"publish","type":"post","link":"https:\/\/www.investmacro.com\/fx\/2012\/02\/13\/worlds-most-contrarian-investment\/","title":{"rendered":"World\u2019s Most Contrarian Investment"},"content":{"rendered":"<div align=\"left\"><script type=\"text\/javascript\">\ntweetmeme_style = 'compact';\n<\/script><br \/>\n<script type=\"text\/javascript\" src=\"http:\/\/tweetmeme.com\/i\/scripts\/button.js\"><\/script>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" class=\"alignnone size-full wp-image-27333\" title=\"World's Most Contrarian Investment\" src=\"http:\/\/www.investmentu.com\/wp-content\/uploads\/2012\/02\/contrarian-investment.jpg\" alt=\"Contrarian Investment Opportunities\" width=\"600\" height=\"167\" \/><\/p>\n<p>How do you identify great contrarian investment opportunities?<\/p>\n<p>Two ways. First, rather than limiting yourself to your national borders, you seek out opportunities worldwide. Next, you insist on two essential factors: abject pessimism and extreme valuations. That\u2019s exactly what we have in European stocks today.<\/p>\n<p>Ask your friends and neighbors which stocks in Europe they\u2019re buying right now and they\u2019ll ask you to sit down so they can feel your forehead. After all, no one in his right mind would buy stocks in a region where socialist policies reign, economic growth is almost nonexistent and the currency \u2013 the euro \u2013 is coming apart at the seams, right?<\/p>\n<p>Wrong. The fact that almost no one is enthusiastic about Europe right now \u2013 indeed, most see it as a ticking time bomb \u2013 tells you that sentiment is entirely negative.<\/p>\n<p>How about valuations? Those are compelling, too. The benchmark MSCI Europe Index, for example, currently sells for just 9.8 times estimated 2012 earnings, versus an average of 17 times earnings over the past 25 years. Plus, the drop in prices has boosted the dividends on many of the well-known global companies based in Europe.<\/p>\n<h2><strong>Lower Values, Higher Dividends\u2026<\/strong><\/h2>\n<p>In sum, you have low valuations, <a title=\"6 Steps for High Yield Dividends\" href=\"http:\/\/www.investmentu.com\/2009\/July\/high-yield-dividends.html\">high dividends<\/a> and extremely negative sentiment. Yet the vast majority of investors reading these words won\u2019t plunk a dime in these markets. (And, if history is any guide, a year or two from now they\u2019ll scratch their heads and say they just can\u2019t fathom how European stocks could have rallied so strongly.)<\/p>\n<p>Not that buying contrarian investments in this troubled region doesn&#8217;t present some risks. After all, the <a title=\"European Central Bank Makes EU Summit Irrelevant\" href=\"http:\/\/www.investmentu.com\/2011\/December\/european-central-bank-makes-eu-summit-irrelevant.html\">European Central Bank (ECB)<\/a> is propping up troubled banks. Many Eurozone countries are teetering on the brink of recession. And there\u2019s a decided lack of bold political leadership in the region.<\/p>\n<p>But the good news is that all these factors are already well known and fully priced into <a title=\"Are European and Japanese Stocks a Contrarian Bargain Opportunity?\" href=\"http:\/\/www.investmentu.com\/2012\/February\/european-and-japanese-stocks.html\">European stocks<\/a>. (That\u2019s why they\u2019re so darn cheap.) Meanwhile, the U.S. economy has stabilized \u2013 reducing a big risk to the global economy \u2013 and the ECB has at least addressed liquidity problems at the banks.<\/p>\n<p>Plus, a weaker euro is actually boosting the earnings prospects for the many companies that export to other parts of the world where economic growth (and currencies) are stronger.<\/p>\n<p>Prime examples are:<\/p>\n<ul>\n<li><strong>Siemens AG<\/strong>\u00a0(NYSE:\u00a0<a href=\"http:\/\/www.google.com\/finance?q=SI\" rel=\"nofollow\">SI<\/a>),<\/li>\n<li><strong>Nestle<\/strong>\u00a0(Pink:\u00a0<a href=\"http:\/\/www.google.com\/finance?q=NSRGY\" rel=\"nofollow\">NSRGY<\/a>),<\/li>\n<li><strong>Novartis<\/strong>\u00a0(NYSE:\u00a0<a href=\"http:\/\/www.google.com\/finance?q=NVS\" rel=\"nofollow\">NVS<\/a>), and<\/li>\n<li><strong>BMW<\/strong>\u00a0(OTC:\u00a0<a href=\"http:\/\/finance.yahoo.com\/q?s=BAMXY.PK\" rel=\"nofollow\">BAMXY.PK<\/a>).<\/li>\n<\/ul>\n<p>So how do you play this contrarian investment opportunity? One of the best ways is with a low-cost, Europe-focused ETF like the\u00a0<strong>Vanguard MSCI Europe Fund<\/strong>\u00a0(NYSE:\u00a0<a href=\"http:\/\/www.google.com\/finance?q=VGK\" rel=\"nofollow\">VGK<\/a>). It\u2019s easily the least expensive ETF in the sector with annual expenses of just .14%.<\/p>\n<p>Companies in the U.K. account for around 34% of VGK\u2019s assets, while France, Germany and Switzerland make up approximately 40%. The fund holds more than 450 stocks, but a quarter of its $2.4-billion portfolio is in its top 10 holdings, which include Vodafone, Royal Dutch Shell and HSBC Holdings. You\u2019ll earn a 4.4% dividend here.<\/p>\n<p>If you want to benefit even more from a potential slingshot recovery in these markets, try the\u00a0<strong>WisdomTree Europe SmallCap Dividend Fund<\/strong>\u00a0(NYSE:\u00a0<a href=\"http:\/\/www.google.com\/finance?q=DFE\" rel=\"nofollow\">DFE<\/a>). It keeps a third of its assets in smaller British companies and the rest in small-cap stocks in the Eurozone.<\/p>\n<p>Remember, when an equity market rallies, the <a title=\"Three Secrets to Picking Winning Stocks in This Market\" href=\"http:\/\/www.investmentu.com\/2010\/November\/small-cap-stock-picking-secrets.html\">small-cap<\/a> issues generally outperform larger stocks. And your contrarian investment will get a whopping 5.8% dividend here.<\/p>\n<p>So there you have it, two great ways to play one of the most compelling opportunities in the world right now. Of course, most investors simply cannot bring themselves to invest against the herd. That\u2019s how they got stuck in internet stocks a decade ago and <a title=\"Is It Time To Sell Gold And Buy Real Estate?\" href=\"http:\/\/www.investmentu.com\/2012\/January\/is-it-time-to-sell-gold-and-buy-real-estate.html\">residential real estate<\/a> five years ago.<\/p>\n<p>It\u2019s also why this is perhaps one of the best contrarian investment opportunities today.<\/p>\n<p>Good Investing,<\/p>\n<p>Alexander Green<\/p>\n<div>\n<a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=TwYpzaf2L1E:kQIqZIEPsqU:yIl2AUoC8zA\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=yIl2AUoC8zA\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=TwYpzaf2L1E:kQIqZIEPsqU:V_sGLiPBpWU\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=TwYpzaf2L1E:kQIqZIEPsqU:V_sGLiPBpWU\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=TwYpzaf2L1E:kQIqZIEPsqU:qj6IDK7rITs\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?d=qj6IDK7rITs\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=TwYpzaf2L1E:kQIqZIEPsqU:gIN9vFwOqvQ\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=TwYpzaf2L1E:kQIqZIEPsqU:gIN9vFwOqvQ\" border=\"0\"><\/img><\/a> <a href=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?a=TwYpzaf2L1E:kQIqZIEPsqU:F7zBnMyn0Lo\"><img decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~ff\/InvestmentU?i=TwYpzaf2L1E:kQIqZIEPsqU:F7zBnMyn0Lo\" border=\"0\"><\/img><\/a>\n<\/div>\n<p><img loading=\"lazy\" decoding=\"async\" src=\"http:\/\/feeds.feedburner.com\/~r\/InvestmentU\/~4\/TwYpzaf2L1E\" height=\"1\" width=\"1\" \/><\/p>\n<p>Article by <a href=\"http:\/\/www.investmentu.com\/\" target=\"_blank\">Investment U<\/a> <\/p>\n","protected":false},"excerpt":{"rendered":"<p>How do you identify great contrarian investment opportunities? Two ways. First, rather than limiting yourself to your national borders, you seek out opportunities worldwide. Next, you insist on two essential factors: abject pessimism and extreme valuations. That\u2019s exactly what we have in European stocks today. Ask your friends and neighbors which stocks in Europe they\u2019re &hellip; <\/p>\n<p class=\"link-more\"><a href=\"https:\/\/www.investmacro.com\/fx\/2012\/02\/13\/worlds-most-contrarian-investment\/\" class=\"more-link\">Continue reading<span class=\"screen-reader-text\"> &#8220;World\u2019s Most Contrarian Investment&#8221;<\/span><\/a><\/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-27343","post","type-post","status-publish","format-standard","hentry"],"_links":{"self":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/27343","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=27343"}],"version-history":[{"count":0,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/posts\/27343\/revisions"}],"wp:attachment":[{"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/media?parent=27343"}],"wp:term":[{"taxonomy":"category","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/categories?post=27343"},{"taxonomy":"post_tag","embeddable":true,"href":"https:\/\/www.investmacro.com\/fx\/wp-json\/wp\/v2\/tags?post=27343"}],"curies":[{"name":"wp","href":"https:\/\/api.w.org\/{rel}","templated":true}]}}