Iwrote here about how given the cheapness of many of the peripheral eurozone markets, it might be time to start putting in a little money. The markets will probably get cheaper there's still too much hope knocking around but nonetheless, on their current cyclically adjusted p/e ratios the likes of Spain and Italy really don't look so bad.
Having had that thought last week and being unwilling to suggest that any of you took the risk of buying only a couple of stocks (who knows how the crisis is going to affect individual companies?) -I started to look for a good fund to suggest.
It wasn't easy. We've often complained about consensus investing among the big fund managers and the lack of really active thinking or trading among the managers we all pay to be active. But look at the top holdings of the big European managers and you will really see what we mean.
Subscribe to MoneyWeek
Subscribe to MoneyWeek today and get your first six magazine issues absolutely FREE
Sign up to Money Morning
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
Don't miss the latest investment and personal finances news, market analysis, plus money-saving tips with our free twice-daily newsletter
They are all heavily invested in the north of Europe. They are all almost entirely absent from the south. They all hold Nestl. They all hold Unilever. They all hold Sanofi. They all hold SAP. And so on. There is an astonishing lack of diversification.
Now, Nestl and Unilever aren't bad companies. Far from it. But it just doesn't seem quite right that everyone has them. I asked one top performing European manager about it. He didn't see it as a problem. Take Nestl he said. It is 5% of the benchmark (there's a clue as to why managers judged against the benchmark like to hold it here); it has almost no debt; it can borrow at almost zero should it want to; input prices for its products are falling; it pays a 4% dividend; and if the euro keeps weakening, it will see profits upgrades as dollar earnings are translated back into euros.
That seems entirely reasonable. But I noted afterwards running through our emails -that there had been no mention of price, the point being that great companies can very easily become expensive stocks.
Then I asked Chris Rice, the manager of the Cazenove European Fund. He rather agrees that some of these favoured stocks are overbought and overpriced he sold Unilever and Nestl last week. Time, he says, to take a look at the likes of Axa and Renault instead.
Finally I spoke to the mostly nice people at Hargreaves Lansdown who provided me with a list of the European funds with the most exposure to theperipheral eurozonemarkets for those of you who are interested (see below).
Subscribers can read more on this in this week's magazine, out on Friday.
| SVM Continental Europe A | 28.58% |
| GLG Esprit Continental Euro Ret Acc | 23.74% |
| Artemis European Growth R Acc | 22.91% |
| JPM Euroland Equity A Acc EUR | 21.91% |
| BNY Mellon Small Cap Euroland A EUR | 21.43% |
| Standard Life Inv European Equity Growth Ret Acc | 20.30% |
| Standard Life Inv European Ethical Equity Ret | 19.02% |
| Invesco Perpetual European Equity Acc | 18.67% |
| BGF Euro-Markets Fund A2 EUR | 18.48% |
| Franklin European Small-Mid Cap Growth A (acc) EUR | 17.63% |
-
Equity release rates drop – is it worth unlocking cash from your home?News Lifetime mortgage rates are falling from their record highs - is equity release worth another look?
-
Hargreaves Lansdown launches fixed-term cash ISA product
savings/hargreaves-lansdown-fixed-cash-isa-launch Investment platform Hargreaves Lansdown is to offer fixed term cash ISAs via its Active Savings platform paying 4.8%, tax free - but is it any good?
-
House prices to crash? Your house may still be making you money, but not for much longer
Opinion If you’re relying on your property to fund your pension, you may have to think again. But, says Merryn Somerset Webb, if house prices start to fall there may be a silver lining.
-
Prepare your portfolio for recession
Opinion A recession is looking increasingly likely. Add in a bear market and soaring inflation, and things are going to get very complicated for investors, says Merryn Somerset Webb.
-
Investing for income? Here are six investment trusts to buy now
Opinion For many savers and investors, income is getting hard to find. But it's not impossible to find, says Merryn Somerset Webb. Here, she picks six investment trusts that are currently yielding more than 4%.
-
Stories are great – but investors should stick to reality
Opinion Everybody loves a story – and investors are no exception. But it’s easy to get carried away, says Merryn Somerset Webb, and forget the underlying truth of the market.
-
Everything is collapsing at once – here’s what to do about it
Opinion Equity and bond markets are crashing, while inflation destroys the value of cash. Merryn Somerset Webb looks at where investors can turn to protect their wealth.
-
Value is starting to emerge in the markets
Opinion If you are looking for long-term value in the markets, some is beginning to emerge, says Merryn Somerset Webb. Indeed, you may soon be able to buy traditionally expensive growth stocks on the cheap, too.
-
ESG investing could end up being a classic mistake
Opinion ESG investing has been embraced with enormous speed and zeal. But think long and hard before buying in, says Merryn Somerset Webb.
-
UK house prices will fall – but not for a few years
Opinion UK house prices look out of reach for many. But the truth is that British property is surprisingly affordable, says Merryn Somerset Webb. Prices will fall at some point – but not yet.
