It’s been doom and gloom in Europe over the past few years. We seem to be light years away from the blueprint of a united and prosperous Europe that Robert Schuman and Jean Monnet envisioned in the 1950s.
Ever since the Credit Crunch, the Eurozone has been in the doldrums, even as countries such as the UK and the US have been recovering. But there are signs that we can at last be hopeful about Europe.
There are signs we can be hopeful about Europe
Crucial to the Eurozone’s recovery is quantitative easing. You know what the greatest difficulty is about a group of countries working together, rather than a state running things by itself? It just takes so long to make decisions. But now that the EU has finally agreed to QE, you can expect things to move quickly.
With 1.1 trillion euros coursing through Europe’s economy, the euro will fall lower and lower, and then lower still. This means industry will be boosted as their exports grow, tourists will flock to the continent, and companies neighbouring the Eurozone, including those in the UK, will also gain.
QE, combined with falling commodity prices, will mean that consumers will spend more. This will benefit consumer-focused companies such as Vodafone (LSE: VOD). Most of Vodafone’s businesses are based in Europe. As its customers realise they have more money in their pockets, they will start to spend. They will buy more expensive smartphones and contracts, and more will subscribe to pay-tv services. It’s no surprise Vodafone’s share price has been rising since QE was announced. A dividend yield of 4.7%, rising to 4.9%, adds to Vodafone’s appeal.
This could be the time to invest in Europe’s companies
This wall of money will also benefit financials such as Banco Santander (LSE: BNC). If you add QE to a picture of steadily falling bad debts and strengthening balance sheets, this is likely to mean the profitability of Europe’s banks pushes ahead. I expect the share price of Banco Santander to trend upwards from here on in. The current P/E ratio of 11, falling to 10 in 2016, looks cheap, and the dividend yield is 3.1%, and rising.
What about that toughest of nuts to crack, Greece? Well, Greece clearly is in appalling difficulty at the moment, and it has many struggles ahead of it, whether or not it leaves the euro. But will this country always be a hopeless case?
One of my favourite investments of the moment is Globo (LSE: GBO). This company provides business-focused mobile apps to companies around the world. Globo is growing fast. The earnings per share (EPS) progression from 2011 to 2015 is: 3.26p, 4.22p, 6.20p, 8.00p, 10.00p. The 2014 P/E ratio is 5.6, falling to 4.5 in 2015. It would be no exaggeration to say this is one of the most promising growth businesses in Europe. And this company is Greek.
Yes, Europe currently is broken; and, undoubtedly, it still has many struggles ahead of it. But there is no reason why it can’t be fixed.
