As Mario Draghi promised, the European Central Bank (ECB) will start to buy corporate bonds from the second half of this year. I wrote when the announcement was made that investors should buy eurozone stocks, and there are various ways in which investors can take advantage of Draghi's generosity.
The most obvious would be to buy a popular eurozone ETF, such as the SPDR EURO STOXX 50 ETF (FEZ), to get exposure to the boost in economic activity that will (hopefully) follow the easier credit conditions in the single currency area.
However, investors with an appetite for risk and some discretionary capital could try to be more innovative. They may want to chase the stocks of companies that are likely to benefit the most from the ECB's corporate debt purchases.
Analysts at Austrian bank Raiffeisen pointed out that European companies are issuing a lot of debt, now that they know they have the backing of the ECB. This week alone, more than 5 billion euros ($5.6 billion) worth of bonds were issued by European companies. "The current attitude of the ECB to massively intervene in the market continues to keep interest rates low," the analysts said.
Indeed, for corporations it's a win-win situation, because even if the ECB doesn't buy their debt, they still benefit from the general lowering of rates.
Three companies that issued debt recently could be of interest for U.S. investors, as they are big European corporations that also have ADRs, which makes exposure to them easier.
Deutsche Telekom (DTEGY) launched a five-year bond worth 500 million euros earlier this week, with a coupon of 0.25%. The company is a big provider of integrated telecommunications and IT services in Germany and Europe, with solid revenue and earnings growth.
Last year, its revenue increased by more than 10% to 69.2 billion euros year on year, while net income jumped by 11% to 3.2 billion euros.
Deutsche Telekom's stock has a consensus rating of Buy among European analysts, and a consensus price target of 18.1 euros in European trading (where it currently trades at around 15.6 euros).
At the beginning of this week, another German company raised debt, this time an automaker. BMW (BAMXY) raised a total of 1.5 billion euros from two bonds: an eight-year, 0.75% coupon one, and a four-year, 0.125% coupon one.
A day later, the automaker reported its best sales month on record for March, having delivered more than 200,000 cars for the first time in its 100-year history, as sales to Asia increased by 10% in the first quarter.
Late last week, another carmaker, this time from France, issued fresh debt. Peugeot (PUGOY) raised 500 million euros in seven-year bonds, with a coupon of 2.375%.
The French automaker is Europe's second-largest after Volkswagen (VLKAY). Moody's upgraded its debt ratings to Ba2 from Ba3 at the beginning of this month.
Among the reasons for the upgrade the rating agency cited Peugeot's "success in implementing its industrial reconstruction plan, as well as the potential for further improvement in earnings in the next 12 to 18 months, as Peugeot launches new models, takes advantage of the positive business momentum in Western Europe and continues its rationalization efforts."
Peugeot wants to launch 26 new models, of which seven will be plug-in hybrids, and has made a push into Chinese and Middle Eastern markets.
These are just three examples of European stocks that could benefit from the ECB's corporate bond buying program. Investors should take a look at the European companies that issue debt and decide, on the basis of their own research, whether they are worth taking the risk.
Meanwhile, there are other areas to look at, as well: