It's hard to believe now, but the markets will stop falling at some point. The problem, as Rev Shark wrote this morning on Real Money, is that there's no knowing when they will stop.
There has been no major fundamental change in the global macroeconomic picture, except perhaps the lifting of sanctions on Iran, which sent another wave of oil into already saturated markets. Jim Cramer -- who called Iran the "Wal-Mart of global oil" -- believes the relentless fall in the price of crude is what's wrong with the stock market, and that stocks will not stop falling until oil prices find a bottom.
Another problem is that investors have gradually lost faith in central banks' ability to influence the global economy for the better. Stock markets may be crashing now because that realization has become more acute.
European Central Bank (ECB) President Mario Draghi has a tough day ahead, tomorrow, at his usual news conference following the central bank's monetary policy meeting. However, Draghi might be in a sweet spot -- investors have been looking at the eurozone with more favorable eyes because of the ECB's asset purchases, which have brought some benefits to the economy.
A survey of fund managers by Bank of America Merrill Lynch, published on Wednesday, shows that they still like Europe. Consumer spending and renewed stimulus are seen as the most important sources of growth in the single European currency area.
Source: Bank of America Merrill Lynch
With that in mind, it might be a good idea to start working on a list of stocks that could benefit from the eurozone recovery, for when the knife stops falling and investors get back into buying mode. And since it's the consumers who are set to be behind that recovery, let's look at some stocks with exposure to European consumers.
- Adidas (ADDYY) is the world's second-biggest producer of sportswear after Nike (NKE). The announcement by the German company that it would replace its current CEO with the CEO of Henkel starting in October sent its shares surging by 11% earlier this week. It derives around 40% of its revenue from Europe, with North America making up around 23% of sales and Asia some 26%. Investors would do well to wait a while, however -- the stock is still expensive, trading on a price/earnings ratio of around 30x. If you don't want to venture into Europe, U.S. retailer Foot Locker (FL) might be another way to get exposure to Adidas and Europe -- Foot Locker is expanding in Europe, where its shops are well received by consumers.
- Carrefour (CRRFY) is a French supermarket that offers exposure to the eurozone's second-largest economy -- but also to emerging markets in Central and Eastern Europe, which have not been affected by the wider emerging markets rout because they are closely linked to the eurozone. Its sales increased by 5.3% in 2015 to 86.3 billion euros ($94 billion), with European sales increasing for the first time in seven years.
- Beiersdorf (BDRFF) is based in Hamburg, Germany. The company boasts Nivea hand and body cream, a strong name very well known in Europe, and the high-end Eucerin face cream among its most famous brands. The company's revenue increased by 3% to 6.69 billion euros in the last 12 months, just above estimates. It is due to report full results on Feb. 17, but investors should take heart from the fact that of 31 analysts offering recommendations for the stock, only one has a "sell" on it. There are 15 "hold" recommendations, eight "buy" and two "outperform," according to data from Thomson Reuters published by the Financial Times.
- L'Oreal (LRLCY) is probably better known than its German rival. It generates more than 40% of sales in Europe, with more than 20% coming from North America and around 18% from Asia. Interestingly among its peers, not only does L'Oreal pay a dividend (other European companies in the sector don't) but it also increased it by around 8% in 2014; for 2015, analysts expect an even higher rise of more than 14%. The company's dividend yield has averaged 2.15% over the past five years. One caveat for investors could be the fact that both its current and quick ratios were below 1 -- looking at its 2014 balance sheet -- mainly due to a jump in short-term debt. But bear in mind that big, solid companies have found it easy to refinance debt due to historically low interest rates. L'Oreal will announce 2015 results on Thursday, Feb. 11.
- Hennes & Mauritz (HNNMY) is not strictly speaking a eurozone stock, because it is listed on the Stockholm stock exchange and Sweden is not a member of the eurozone (in theory it should join, but mysteriously it keeps missing the convergence criteria). The share price fell by 16% over the past year, as the clothing market was tough even for a big company like H&M. Its main market is Germany, taking in around 20% of sales, followed by the U.S. with 10%. The U.K. and France with around 7% are also important markets for H&M. Analysts at Austrian bank Erste have a "buy" rating on the stock, saying that "profits and sales are expected to grow nicely in 2015 and 2016," as H&M expands into the luxury segment.