• Subscribe
  • Log In
  • Home
  • Daily Diary
  • Asset Class
    • U.S. Equity
    • Fixed Income
    • Global Equity
    • Commodities
    • Currencies
  • Sector
    • Basic Materials
    • Consumer Discretionary
    • Consumer Staples
    • Energy
    • Financial Services
    • Healthcare
    • Industrials
    • Real Estate
    • Technology
    • Telecom Services
    • Transportation
    • Utilities
  • Latest
    • Articles
    • Video
    • Columnist Conversations
    • Best Ideas
    • Stock of the Day
  • Street Notes
  • Authors
    • Bruce Kamich
    • Doug Kass
    • Jim "Rev Shark" DePorre
    • Helene Meisler
    • Jonathan Heller
    • - See All -
  • Options
  • RMPIA
  • Switch Product
    • Action Alerts PLUS
    • Quant Ratings
    • Real Money
    • Real Money Pro
    • Retirement
    • Stocks Under $10
    • TheStreet
    • Top Stocks
    • Trifecta Stocks
  1. Home
  2. / Investing
  3. / U.S. Equity

Looking Across the Pond

Some European names look ripe for investment right now.
By BRET JENSEN
Oct 18, 2013 | 12:00 PM EDT
Stocks quotes in this article: AEG, MRK, TEVA, NVS

After watching the last few weeks of political dysfunction in our nation's capital, it is easy to see why investors and businesses lack much certainty right now. A month of politicians' preening, partisanship and petulance has left some investors looking for better investment environments in other regions in the world.

One area that looks ripe for additional investment is Europe. After six straight quarters of contraction, the continent actually just posted a positive quarterly GDP number. In addition, its sometimes challenging political structure looks cohesive compared to the acrimony the U.S. has experienced over the last month.

I think Europe provides a good vehicle to diversify one's investment portfolio and the overall market is selling at a discount to the current valuation in domestic equities. Economic and job growth in the U.S. in 2014 will likely continue to be tepid as the Affordable Care Act gets fully implemented and the Federal Reserve eventually starts to taper its quantitative easing program. Europe might offer better opportunities as it emerges from a long recession.

Here are two European equities that investors looking to allocate additional money across the pond may want to consider.

With a solid oncology franchise (Avastin, Herceptin and Rituxin), Roche (RHHBY.OB) is one of biggest pharmaceutical operations in Europe. The company is also a leader in the production of biologics, which are complex medicines derived from living organisms. These compounds tend to carry higher margins and are much harder to copy when patent protection lapses.

The company just announced it will spend about $900 million on four facilities and add staff to increase the production of these biologic products. considering that major drug makers including Merck (MRK) and Teva Pharmaceuticals (TEVA) are going through with significant layoffs, this is a substantial vote of confidence by management in the company's future.

Roche gets about one-third of its revenue from the U.S. where sales are growing at a pace of about 10%. Overall sales for the company are increasing at a 6% to 7% annual rate.  Novartis (NVS) owns one-third of the voting shares, and there have been longstanding rumors the firms will eventually merge. The shares do sell for around 19x earnings. However, long-term investors looking for world class pharmaceutical play with leading products in oncology should consider the shares. Roche also pays a 3% dividend.

AXA Group (AXAHY) is one of Europe's largest providers of insurance and asset management services. I like AXA for some of the same reasons that I like its fellow European insurance provider Aegon N.V. (AEG), which has been a consistent performer since I highlighted it in late July.

Like Aegon, AXA sells for less than book value and has an improving earnings picture. The company is tracking to post more than a 20% year-over-year gain this fiscal year and analysts believe at least another 10% increase is in store for fiscal 2014. In addition, consensus earnings estimates for fiscal 2014 have moved up nicely over the past three months.

As European financial markets continue to stabilize, banks and insurers stand to benefit -- much like our financial institutions did after we emerged from the financial crisis in 2009 and 2010. Plus, AXA is cheap,  trading below 9x forward earnings. It also pays a 3% dividend.

Get an email alert each time I write an article for Real Money. Click the "+Follow" next to my byline to this article.

At the time of publication, Jensen was long AEG.

TAGS: Investing | U.S. Equity

More from U.S. Equity

How I'm Approaching Stocks and Bonds After the Fed Minutes

Peter Tchir
May 26, 2022 12:19 PM EDT

I see three key takeaways from Wednesday's FOMC release.

The Bounce Is On: Here's What I've Been Buying

James "Rev Shark" DePorre
May 26, 2022 11:28 AM EDT

The big question now is how far can this run?

Is It Time to Put Money to Work?

Guy Ortmann
May 26, 2022 10:15 AM EDT

Two key indexes have come off their previous negative implications.

The Much-Anticipated Bear Market Bounce Is Starting

James "Rev Shark" DePorre
May 26, 2022 7:49 AM EDT

The best indicator of a tradable bounce is when stocks stop going down on bad news.

Fed Minutes, Rate Hike Odds, Economic Decay, Apple Production, Trading Costco

Stephen Guilfoyle
May 26, 2022 7:16 AM EDT

This is a traders' market until it isn't.

Real Money's message boards are strictly for the open exchange of investment ideas among registered users. Any discussions or subjects off that topic or that do not promote this goal will be removed at the discretion of the site's moderators. Abusive, insensitive or threatening comments will not be tolerated and will be deleted. Thank you for your cooperation. If you have questions, please contact us here.

Email

CANCEL
SUBMIT

Email sent

Thank you, your email to has been sent successfully.

DONE

Oops!

We're sorry. There was a problem trying to send your email to .
Please contact customer support to let us know.

DONE

Please Join or Log In to Email Our Authors.

Email Real Money's Wall Street Pros for further analysis and insight

Already a Subscriber? Login

Columnist Conversation

  • 02:46 PM EDT STEPHEN GUILFOYLE

    We're Shedding Some of This Holding on Strength

    Check out the Stocks Under $10 portfolio here!
  • 11:33 AM EDT PETER TCHIR

    Thoughts Ahead of the Fed Minutes

    Recent economic and earnings issues are convincing...
  • 02:24 PM EDT PAUL PRICE

    An Interesting Chart

    I'm betting heavily that stocks will be way up aga...
  • See More

COLUMNIST TWEETS

  • A Twitter List by realmoney
About Privacy Terms of Use

© 1996-2022 TheStreet, Inc., 225 Liberty Street, 27th Floor, New York, NY 10281

Need Help? Contact Customer Service

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

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.

FactSet 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.

Compare Brokers

Please Join or Log In to manage and receive alerts.

Follow Real Money's Wall Street Pros to receive real-time investing alerts

Already a Subscriber? Login