Let's Talk About Europe

 | Jul 25, 2013 | 11:00 AM EDT
  • Comment
  • Print Print
  • Print
Stock quotes in this article:
















Over the last week or two, sentiment seems to have shifted on Europe. The weekend cover story in Barron's was "Europe's Economy Will Rebound," and on Wednesday, the eurozone PMI came in at a stronger than expected 50.1. This was its first reading above 50 in quite some time and it's a sign that the long GDP contraction on the continent might be coming to an end.

German business confidence is on the upswing and Spanish unemployment dropped for the first time in two years during the second quarter. Recent comments from management at Ford (F) and Daimler indicate that the European auto market seems to be bottoming and second half performance should be better than the first half. Ford also showed improved results from its European operations on its earnings release yesterday.

These signs could be a welcome positives for the prospects of American multinationals with significant operations on the continent, including IBM (IBM), General Electric (GE), Dow Chemical (DOW) and McDonald's (MCD). However, it also means that it might be time to increase exposure to some companies that are based across the pond. Here are two stocks that I think have a lot of value right now.

Aegon N.V. (AEG) is a leading international insurance group based in the Netherlands that primarily offers life insurance, pension, savings and investment products. The company is still working through legacy issues and operating in a low interest rate environment. The stock has also made a big run over the last year, moving from below $4.50 a share to above $7 a share. However, AEG was selling for north of $60 a share prior to the financial crisis.

The stock is selling at just over 40% of book value. The company is almost finished with a significant restructuring that will give it a solid operating base and enhanced capital strength. This insurer has a large U.S. book of business, which should improve substantially with rising interests as well as a recovering housing market. The company reinstated its dividend in 2012 and yields over 3%. Given this, AEG is not expensive at around 10x earnings.

KNOT Offshore Partners (KNOP) just came public in April. This U.K.-based company owns and operates shuttle tankers that service major oil and gas companies engaged in offshore production, such as Statoil (STO), that are on long-term contracts. The company just announced its first quarterly cash distribution, which will give KNOP a better than 6% yield. The company is off the radar of income investors, as the first payment will not occur for several weeks and is not showing up on filters looking for yield yet.

In addition, revenues are expected to increase about 40% in fiscal 2014. KNOT will have additional drop-down opportunities from its parent company (a Norwegian/Japanese joint venture) over time. The firm made its first acquisition of a shuttle tanker, with 4.5 years left on its existing servicing contract, since its IPO recently. Management sees the acquisition being accretive to earnings and its distribution payment once completed. The company is on track to make around $1 a share in earnings this year and analysts have a consensus estimate of over a $1.30 a share in fiscal 2014.



News Breaks

Powered by


Except as otherwise indicated, quotes are delayed. Quotes delayed at least 20 minutes for all exchanges. Market Data provided by Interactive Data. Company fundamental data provided by Morningstar. Earnings and ratings provided by Zacks. Mutual fund data provided by Valueline. ETF data provided by Lipper. Powered and implemented by Interactive Data Managed Solutions.

TheStreet Ratings updates stock ratings daily. However, if no rating change occurs, the data on this page does not update. The data does update after 90 days if no rating change occurs within that time period.

IDC calculates the Market Cap for the basic symbol to include common shares only. Year-to-date mutual fund returns are calculated on a monthly basis by Value Line and posted mid-month.