Tags: Brown | Europe | stocks | PE

Blogger Brown: Buy European Stocks While They're Still Cheap

Friday, 02 Aug 2013 07:56 AM

By John Morgan

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European stocks are so downtrodden and the news from the continent is so bad that it's time to begin accumulating shares there, according to investment advisor Josh Brown, author of The Reformed Broker blog.

"European stocks have stopped going down," he told Yahoo. "The good news is they've underperformed the U.S. market by such a huge extent, it's historic."

After a 4 percent rally in July, the benchmark FTSE 100 is still underperforming the Standard & Poor's 500 in 201, with a considerably lower price-earnings multiple. Brown said the U.S. market is trading at about 16 times earnings, while Europe is trading at only 11 times earnings.

Editor’s Note:
399% Stock Market Rally Predicted (Buy These 4 Stocks Now)

"I'm not saying Europe is going into boom times. We're all aware what the issues are there," he told Yahoo.

Much of Europe is facing high unemployment as parts of the region work their way through a long recession, and nations in the southern eurozone — notably Spain, Italy and Portugal — are still teetering amid staggering deficits and austerity measures.

Brown said one way to play Europe is to find a mutual fund that tracks the broad market there.

He noted many of Europe's largest companies are actually global companies that make considerable profits outside the region, so their current valuations are out of kilter with their true prospects.

"This is not a trade that we expect to work out next month," he said. "We're happy to be wrong because we don't have a full position on yet. ... In fact, when the trade gets popular, we hope to be trimming and selling into that."

Laura Fitzsimmons, vice president of futures and options at JPMorgan Investment Bank, told CNBC that recent positive economic data from the region plus the European Central Bank's dovish stance will help European stocks, which have lagged global stock markets in 2013.

"The first half of the year was about Japan and also the U.S. to an extent," Fitzsimmons noted. "For us the focus now has become Europe. We do actually see a fair amount of upside in terms of our economic forecasts for the eurozone region."

With the gains of the past few weeks, Bloomberg reported the Stoxx 600 now trades at a price-earnings multiple of 13.7, its highest since 2009.

"I'm still bullish on European stocks and think they are undervalued," Herbert Perus, head of equities at Raiffeisen Capital Management in Vienna, told Bloomberg.

Editor’s Note: 399% Stock Market Rally Predicted (Buy These 4 Stocks Now)

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