The green shoots of growth have begun to emerge within Europe over the past 12 months. For example, Spanish economic growth is gaining traction, Germany is still growing and 24 EU countries have reported a drop in unemployment over the last year.
These figures have prompted the European Central Bank to upgrade its growth forecast for the Eurozone in 2015 to 1.5%, from 1.0%.So the region appears to be turning a corner, and for this reason, I’m on the hunt for European bargains.
Industrial sector
One of the best places to look is the European manufacturing sector. With the value of the euro falling, exporters should receive a boost as a weaker domestic currency generally stimulates exports — exactly what struggling exporters in the region need. This is one of the side effects of the ECB’s quantitative easing program.
And investors don’t have to look far to find high-quality European manufacturers. Airbus, Siemens, BASF and Bosch are some of Europe’s top industrial conglomerates, and they are all powering ahead as economic growth takes off.
Property plays
Outside the manufacturing sector, there are also deals to be found in Europe’s beaten-down property market. Indeed, the European property sector has seen a sharp turnaround over the past few months with asset prices jumping 5% to 20% since the end of last year. During 2014, the value of property transactions jumped by 36% across the region.
Spain in particular has attracted the most attention in the renewed euro area property boom. The Spanish property market has attracted some of the world’s best investors, including Carlos Slim and Microsoft founder Bill Gates.
Gates and Slim hold spots one and two on the list of the world’s wealthiest people so investors should watch where they’re investing closely. Both of these multi-billionaires have invested heavily in Spanish property of the past few years, snapping up builders, Spanish real-estate investment trusts and physical property.
And with property prices across the region rising, interest rates falling and economic growth gaining traction, European property looks to be a great investment.
Bargains to be found
There are plenty of bargains to be found across Europe. According to my figures, in the Eurozone’s four largest economies — Spain, Germany, France and Italy — out of 863 companies screened, 77 are trading at a forward P/E of less than 15. Ten of these companies support dividends yields of 3% or more.
Some of the cheapest plays include banking giants BNP Paribas, Santander and Societe Generale. Utility company EDF also makes the cut and so does luxury fashion designer Christian Dior. Other attractively priced plays include industrial conglomerate Siemens, automotive giant BMW and conglomerate Daimler.
These companies all have market capitalisations of more than 30bn euros so they’re hardly undiscovered gems and growth is likely to be sluggish.
