It's not looking good for the eurozone.
Cyprus has just become the fifth country in the area to request a bail-out. Meanwhile, Greece's new finance minister has already handed in his resignation.
No wonder markets are rattled ahead of the latest last-ditch' summit, which happens at the end of this week.
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It's all very worrying.
But it also spells opportunity. I think there's a way that you could profit from the fear surrounding one troubled eurozone country in particular Spain.
One Spanish business that's doing well in the downturn
There's no doubt that Spain has a lot of problems just now. Its banks are broke, there's been a massive property bust, and huge numbers of young people are out of work.
But often the best time to invest is when the outlook is worst. And you don't have to buy a Spanish stock to take advantage.
I've been looking at UK bus and coach company National Express (LSE: NEX). The share price is down 20% in the year to date (it had fallen as low as 176p a couple of weeks ago). This is largely due to fears that its Spanish bus operations could run into trouble, as Spain's economy deteriorates even further.
National Express profit makeup
The chart above shows why investors are worried. Spain (shown in light blue) makes up over a third of National Express' profits. When the group's last UK rail franchise expires in May next year, Spain's contribution to group profits will be even bigger.
But this looks like an over-reaction to me. It's easy to argue that if Spain is going down the pan, you might as well just avoid all companies with any Spanish connections.
It seems like a sensible view. Yet, if you take the time to actually dig into what's going on, National Express' Spanish business, ALSA, is doing pretty well. ALSA has a 20% share of the Spanish regulated bus and inter-city coach business. It has 162 inter-city concessions and 22 urban bus contracts in Spain.
In fact, the weak economy has in many ways actually benefited the Spanish coach system. That's because the inter-city coaches are cheaper than taking the train or the plane. The state-owned rail sector has to operate with lower government support and higher fares, while low cost airlines have cut capacity on many routes.
As a result, National Express' inter-city business is growing by 5% year to date. Profits should keep growing too.
Of course, no business is without risk. A small part of the business has contracts with the public sector. There's always a chance that these could turn sour if the government runs out of cash. Then there are the inter-city contracts that need to be re-tendered every few years.
However, in this type of business, existing participants tend to do well. You need to spend lots of money to build a network which can deter new entrants.
So, all in all, Spain's problems do not look disastrous for National Express. In fact, its service is very much in tune with the economic mood. There looks to be more scope to grow rather than shrink. The company has even made the short hop across the Mediterranean and is now running buses in Morocco.
The bus business looks good in Britain too
There are plenty of other things to like about the company. Its iconic National Express coach business in the UK is benefiting from the mediocre economy for similar reasons to its Spanish division, proving particularly popular with pensioners and students. It's probably not going to grow fast, but with rail fares continuing to soar in the UK, it will become increasingly attractive to cash-strapped travellers.
The company's biggest opportunity is perhaps in America, where it has the second-biggest private school bus business, behind UK rival First Group.
Around two-thirds of this $24bn market is still provided by the schools themselves. But school budgets are under huge pressure. Given that it costs a lot of money to buy and run buses, there's a good chance that more school bus services could be outsourced to private companies.
But can National Express grab a growing share of this? I suspect so. The market leader, First Group, has lots of internal issues to deal with. Moreover, National Express CEO, Dean Finch used to run First Group's American bus business and probably knows the ins and outs of lots of its current contracts. After spending the last two years clearing up the mess left by his predecessor at National Express, Mr Finch now has the time to attack this market.
Finally and most importantly National Express looks reasonably priced. At just over eight times forecast earnings with a dividend yield of over 5%, the shares look good value.
For comparison, while Stagecoach probably remains the best run and least risky investment in the sector, it trades on ten times forecast earnings and 3.1% yield. That's not bad, but National Express has a more attractive valuation.
And its dividend like Stagecoach's but not FirstGroup's is comfortably covered by its more stable bus profits and does not rely on volatile and often temporary rail profits. National Express has also stated that its dividends will be covered twice by its non-rail profits and by its surplus cash flow.
I'll admit that my timing has not been brilliant on this stock: I tipped it in MoneyWeek magazine as a 'buy' in early March at a much higher 237p. But I've seen nothing to change my mind that the company has some good-quality assets and is capable of growing dividends. That makes it a good long-term buy in my book. That said, if you have more of a gambling mentality, then worries about Spain might allow you to get in at a lower price in future - in which case, stick it on your watch list.
If you're interested in finding opportunities in the eurozone directly, then make sure you get this week's copy of MoneyWeek (out on Friday) we've had our Roundtable experts cast their eyes over Europe and pick the stocks they think are best-placed to profit amid the upheaval. If you're not already a subscriber, subscribe to MoneyWeek magazine.
This article is taken from the free investment email Money Morning. Sign up to Money Morning here.
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