Neglected European stocks set to soar
Europe hasn't been the investors' location of choice recently. But now European stocks, having lagged behind the US since March, may be set to outperform.
Contrarians will warm to a sector where there is "an absence of enthusiasm of any kind", says Tim Price of PFP Wealth Management.
Enter Europe: as Barry Norris of Argonaut Capital Partners points out, net flows into European equity funds have been negative for the past two years. Morgan Stanley notes that at a recent conference, just 19% of investors chose Europe as their favourite investment region while 42% plumped for the US.
On top of that, Europe is also trading at close to a 35-year low relative to US equities in terms of a composite valuation measure including the price/book-value ratio and dividend yields. Citigroup says that pan-Europe's price/book is close to mid-1990s levels.
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So European stocks, having lagged behind the US since March, may be set to outperform. Short-term risks abound, but as Warren Buffett says, "the time to get interested is when no one else is".
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