European Stocks: We Have Lift Off !

European stocks have soared so far this year. The STOXX® Europe 600 index is up 20.55% year-to-date and closed at 412.93 on Friday. On April 9th, the index reached a new record as shown in the chart below. The Stoxx 600 is similar to the S&P 500 benchmark index for the U.S. market.

Click to enlarge

Stoxx 600 chart

Source: European Stocks Set New Record, The Wall Street Journal, April 9, 2015

From the above Journal article:

The latest leg of the rally has been fueled by the European Central Bank’s efforts to stimulate the lackluster eurozone economy by buying bonds. The program, which mirrors the measures taken by the Federal Reserve in recent years, has crushed the returns available for new bond buyers. As stocks rallied on Thursday, Germany’s 10-year government-bond yield sank to an all-time low of 0.14%.

Depressed bond yields push investors into riskier assets such as equities. At the same time, the bruised eurozone economy is showing signs of life, while the U.S. recovery has weakened. The result: A wave of cash has flowed into Europe’s stock markets.

“A few months ago, this was unthinkable. Nobody wanted to buy Europe. Now, everything has changed,” said Luca Paolini, chief strategist at Pictet Asset Management, which manages $437 billion of assets and favors European stocks relative to U.S. markets in its portfolios.

It is not surprising that European equities are outperforming their U.S. peers this year. I wrote a few articles last year discussing why European stocks were attractive. You can find two of those here and here.

Compared to the S&P’s 2.3% growth year-to-date, the returns of major European indices are much higher as listed below:

  • France’s CAC 40: 22.6%
  • Germany’s DAX Index: 26.2%
  • Spain’s IBEX35 Index: 14.3%
  • UK’s FTSE 100: 8.0%

The table below shows the year-to-date returns of European exchange-listed ADRs:

CompanyTickerStock price as of April 9, 2015 Year-to-date ChangeIndustryCountry
AmarinAMRN$2.59164.29%Pharma. & Biotech.United Kingdom
AbengoaABGB$17.9765.17%Alternative EnergySpain
Forward PharmaFWP$32.0453.82%Pharma. & Biotech.Denmark
Sequans CommunicationsSQNS$1.6841.18%Tech.Hardware&Equip.France
VimpelCom - ComVIP$5.7036.36%Mobile Telecom.The Netherlands
GW PharmaceuticalsGWPH$91.3234.93%Pharma. & Biotech.United Kingdom
Novo NordiskNVO$55.9432.18%Pharma. & Biotech.Denmark
DelhaizeDEG$23.5930.19%Food &Drug RetailersBelgium
Innocoll AGINNL$7.3022.90%Pharma. & Biotech.Germany
LuxotticaLUX$64.5318.47%Personal GoodsItaly
ShireSHPG$248.7717.05%Pharma. & Biotech.United Kingdom
Fresenius Medical CareFMS$43.3916.83%HealthCareEquip.&SerGermany
PearsonPSO$21.5516.80%MediaUnited Kingdom
ING GroepING$14.9915.57%Life InsuranceThe Netherlands
SanofiSNY$52.3514.78%Pharma. & Biotech.France
Fly LeasingFLY$15.0214.22%IndustrialTransport.Ireland
WPPWPPGY$117.7713.13%MediaUnited Kingdom
GlaxoSmithKlineGSK$48.2312.85%Pharma. & Biotech.United Kingdom
voxeljet AGVJET$9.1512.68%Tech.Hardware&Equip.Germany
CGGCGG$6.6312.37%Oil & Gas ProducersFrance
NovartisNVS$103.5811.79%Pharma. & Biotech.Switzerland
AB InBevBUD$125.0911.37%BeveragesBelgium
Telecom ItaliaTI$11.7111.10%Fixed Line Telecom.Italy
ARMARMH$51.4211.06%Tech.Hardware&Equip.United Kingdom
UnileverUN$43.2410.76%Food ProducersThe Netherlands
Credit SuisseCS$27.7010.45%BanksSwitzerland
ASM InternationalASMI$46.6110.01%Tech.Hardware&Equip.The Netherlands
AvivaAV$16.359.73%Life InsuranceUnited Kingdom
CarnivalCUK$49.289.54%Travel & LeisureUnited Kingdom
PrudentialPUK$50.419.18%Life InsuranceUnited Kingdom
BPBP$41.548.97%Oil & Gas ProducersUnited Kingdom
StatoilSTO$19.028.01%Oil & Gas ProducersNorway
Banco Bilbao Vizcaya ArgentariaBBVA$10.117.67%BanksSpain
BT GroupBT$66.517.29%Fixed Line Telecom.United Kingdom
AegonAEG$8.047.20%Life InsuranceThe Netherlands
Reed ElsevierENL$50.956.95%MediaThe Netherlands
Telefonaktiebolaget LM EricssonERIC$12.866.28%Tech.Hardware&Equip.Sweden
UnileverUL$42.875.90%Food ProducersUnited Kingdom
Randgold ResourcesGOLD$71.195.61%MiningJersey
Amec Foster Wheeler PLCAMFW$13.403.55%Construct.&MaterialsUnited Kingdom
EniE$36.073.32%Oil & Gas ProducersItaly
Flamel TechnologiesFLML$17.552.45%Pharma. & Biotech.France
Trinity BiotechTRIB$17.841.88%HealthCareEquip.&SerIreland
ABBABB$21.541.84%Industrial Engineer.Switzerland
GrifolsGRFS$34.601.79%Pharma. & Biotech.Spain
Reed Elsevier PLCRUK$69.181.66%MediaUnited Kingdom
InterContinental HotelsIHG$40.591.35%Travel & LeisureUnited Kingdom
Barclays BankBCS$15.140.87%BanksUnited Kingdom
British American TobaccoBTI$108.670.79%TobaccoUnited Kingdom
Lloyds Banking GroupLYG$4.670.65%BanksUnited Kingdom
TOTALTOT$51.410.41%Oil & Gas ProducersFrance
Koninklijke Philips ElectronicsPHG$29.100.34%Leisure GoodsThe Netherlands
BHP BillitonBBL$43.060.14%MiningUnited Kingdom
DiageoDEO$113.80-0.25%BeveragesUnited Kingdom
National Westminster BankN/A$26.00-0.46%BanksUnited Kingdom
AstraZenecaAZN$69.91-0.67%Pharma. & Biotech.United Kingdom
TelefonicaTEF$14.11-0.70%Fixed Line Telecom.Spain
Vodafone GroupVOD$33.53-1.87%Mobile Telecom.United Kingdom
DBV Technologies S.A.DBVT$26.58-1.99%Pharma. & Biotech.France
CSRCSRE$51.33-2.53%Electron.&ElectricEqUnited Kingdom
OrangeORAN$16.40-3.07%Fixed Line Telecom.France
Smith & NephewSNN$34.98-4.79%HealthCareEquip.&SerUnited Kingdom
HSBCHSBC$44.69-5.38%BanksUnited Kingdom
National GridNGG$66.41-6.01%Gas,H20&MultiutilityUnited Kingdom
ASMLASML$100.02-7.24%Tech.Hardware&Equip.The Netherlands
RyanairRYAAY$66.10-7.25%Travel & LeisureIreland
Rio TintoRIO$41.45-10.01%MiningUnited Kingdom
Royal Dutch Shell - A SharesRDS.A$59.73-10.78%Oil & Gas ProducersUnited Kingdom
Banco SantanderSAN$7.32-12.12%BanksSpain
Royal Dutch Shell - B SharesRDS.B$60.40-13.17%Oil & Gas ProducersUnited Kingdom
LuxferLXFR$12.91-13.53%Indust.Metals&MiningUnited Kingdom
Royal Bank of ScotlandRBS$10.25-15.36%BanksUnited Kingdom
National Bank of GreeceNBG$1.28-28.49%BanksGreece
Celsus Therapeutics PlcCLTX$0.69-85.63%Pharma. & Biotech.United Kingdom

Source: BNY Mellon

Though European equities have rallied strongly there is still room to run as the economy recovers. However the easy money has already been made. So further growth in equity prices will be staggered. Investors looking to invest in Europe have to take a deep dive and identify opportunities that are under-valued at current levels. One sector that investors can hunt for bargains is the oil sector. Other than the oil firms themselves plenty of options exist in the infrastructure and services space within the oil industry.Many high-quality firms have seen their stock prices cut in half or more in recent months due to the fall in oil prices. However as the price of oil recovers and European economies pick up steam these firms should recover.

Wales Train

Railway Station in N.Wales


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